Battery stocks plummet due to concerns over softening EV demand
The local stock market bounced back slightly, Wednesday, a day after it fell sharply due to the plunging share prices of rechargeable battery manufacturers brought on by dampening investor sentiment over a softening of demand for electric vehicles (EV).
The combined losses of over 13 trillion won ($9.5 billion) by 10 leading local rechargeable battery makers are explained in large part by Tesla’s share price dipping nearly 5 percent. The drop followed U.S. automotive battery supplier Panasonic cutting production to adjust to slowing demand estimates. Tesla’s share price closed at $197.36, Oct. 30 (local time), down 4.79 percent from the previous session. The last time the figure dipped below $200 was May 26, when it hit $193.17.
According to the Korea Exchange, Korea’s main bourse KOSPI and tech-heavy Kosdaq, the top 10 listed battery makers have lost a combined 13.6 trillion won, as of Tuesday.
The KOSPI-listed POSCO Holdings lost 4.97 percent, followed by LG Energy Solution losing 4.81 percent. Kosdaq-listed EcoPro slid 6.34 percent, while its affiliate EcoProBM lost 7.45 percent.
SK Securities Cho Joon-ki said the wide fluctuations in the share prices of local rechargeable batteries have been and will continue to be pronounced, since the Tesla-tied global secondary battery chain issues are unlikely to be resolved soon.
“The fluctuations in the share prices of local rechargeable battery manufacturers have a close causal relationship with Tesla’s,” Cho said.
“Sustained large gains in their share prices in the first half of this year contributed greatly to the explosive performance of the local bourse. The impact of their losses is just as great on the market.”
Hanwha Investment & Securities researcher Yim Hye-yun said a tightening of investor sentiment will make it difficult to dispel market jitters any time soon, unless policy assistance is outlined to navigate concerns of a potential economic recession.
“The path to economic recovery itself is not likely to derail altogether. It is about how much of a recovery the economy will be able to see,” Yim said.
Among economic indicators backing the assessment is China’s Manufacturing Purchasing Managers’ Index (PMI) in October. The monthly figure came to 49.5, below the market forecast of 50.2. A below-50 reading indicates a contraction, whereas over 50 suggests an expansion.
The KOSPI closed at 2,301.51, Wednesday, up 23.52 pints or 1.03 percent from a day earlier. It was a recovery from the previous session when it closed at 2,277.99, down 1.41 percent from the day before. Tuesday’s figure was the lowest since Jan. 5 when it was at 2,264.65.
POSCO Holdings closed at 402,500 won, Wednesday, down 2.19 percent further from a day earlier. EcoPro closed at 597,000 won, a continued drop of 3.71 percent from the day before.