Potential selling could increase to 121 trillion won if benchmark index reaches 10,000, analyst says Electronic boards display the Kospi index at the dealing room of Woori Bank headquarters in central Seoul on Friday, as the benchmark index fell to the 8,600 level in early trading. Shares of Samsung Electronics and SK hynix also traded lower. (Yoon Chang-bin) South Korea's National Pension Service could sell as much as 74 trillion won ($47.9 billion) of domestic equities if the Kospi rises above 9,000, according to estimates from South Korea's financial investment industry. Potential selling could climb to 121 trillion won, should the benchmark index reach 10,000 points.The estimates come as foreign and retail investors have turned net sellers after the market's sharp rally.According to South Korea's financial investment industry on Friday, domestic equities would account for 29.6 percent of the NPS portfolio if the Kospi reaches 8,500 points and 30.8 percent at 9,000 points.The NPS adjusts its portfolio through rebalancing under its long-term asset allocation plan.When an asset class exceeds its target weighting, the pension fund trims its holdings. When it falls below the target, it increases its exposure. The strategy is designed to lock in gains during strong markets while buying assets when valuations are lower, helping improve long-term returns and maintain portfolio stability.On May 28, the National Pension Fund Management Committee raised the target allocation for domestic equities to 20.8 percent from 14.9 percent. It also widened the Strategic Asset Allocation tolerance band to plus or minus 6 percentage points from plus or minus 3 percentage points. Combined with the Tactical Asset Allocation band of plus or minus 2 percentage points, the NPS can now deviate by as much as 8 percentage points from its target.Earlier this year, the NPS postponed its rebalancing deadline until the end of June to avoid disrupting the market.The Kospi's continued rally has since pushed the fund's domestic equity weighting above its target range. With the temporary delay ending this month, analysts expect the NPS to step up equity sales from July."We estimate the NPS' domestic equity weighting would exceed 28.8 percent, the upper limit of its combined SAA and TAA tolerance bands, once the Kospi rises above 8,175," said Cho Yong-gu, an analyst at Shinyoung Securities."The weighting would increase to 29.6 percent at 8,500 and 30.8 percent at 9,000, remaining well above the upper limit," Cho said. "Required selling would rise sharply once the Kospi moves beyond 9,500."Cho outlined three scenarios based on how much flexibility the NPS uses within its allocation bands: the full 2 percentage-point TAA allowance, a 1 percentage-point allowance and the SAA band alone.If the NPS fully uses both the SAA and TAA buffers, it would need to sell about 37 trillion won worth of domestic equities at 9,000, rising to 60 trillion won at 9,500 and 83 trillion won at 10,000.If it uses only a 1 percentage-point TAA buffer, required selling would increase to 56 trillion won, 79 trillion won and 102 trillion won at the respective index levels.Without using any TAA flexibility, required selling would reach 74 trillion won at 9,000, 98 trillion won at 9,500 and 121 trillion won at 10,000 points."However, the NPS has extended its rebalancing period to 20 trading days from 10 while reducing daily trading volumes to limit market impact," Cho said. "If the rally continues and the amount of required selling grows further, the NPS is likely to spread out its sales and could consider raising its target allocation for domestic equities again by the end of the year."