Concerns rise over surge in short-selling of battery shares

Goldman Sachs, Merrill Lynch and Morgan Stanley top list of EcoPro short-selling balances

By Lee Min-hyung

Korea's stock market is extending a volatile run in the face of a surge in short-selling of red-hot battery shares here.

Data from the Korea Exchange showed investors' short-selling transaction volume on the benchmark KOSPI and secondary Kosdaq reached a monthly high in July. The figure amounted to 22.87 trillion won ($17.83 billion), up more than 55 percent from the previous month.

The KOSPI's daily short-selling transactions were worth 687.3 billion won on a daily basis last month, up 57.9 percent from a month earlier. The Kosdaq also increased 51.65 percent to 401.4 billion won during the same period.

This was triggered by the frenzied trading of battery stocks last month when most shares related to secondary batteries saw an increase in volatility due to an ever-optimistic industrial outlook. Until only recently, shares of EcoPro, POSCO and LS were on bullish runs, especially attracting the attention of retail investors. But some institutional investors also considered the recent battery rally as a bubble and betted on their downward adjustment by engaging in the short-selling of battery shares.

According to data from the exchange operator, three institutional investors ― Goldman Sachs, Merrill Lynch and Morgan Stanley placed their names on a list of investors who hold a considerable amount of short-selling balances on EcoPro for five trading days last week.

During that period, Korea Exchange data showed that JPMorgan was the only institutional investor on the list for POSCO Holdings ― another battery stock that was at the center of investors' attention due to its steep price rise last month.

Fears regarding battery short-selling are affecting the overall stock market sentiment here, as the main bourse and secondary stock markets moved in tandem with the volatile ups and downs of the large-cap battery shares. But as battery fever is showing no clear signs of ending anytime soon, the stock indexes are also forecast to extend their unstable runs for the time being.

The extreme volatility of battery shares pushed local brokerage houses to remain quiet over the outlook of their future price movements. Only a few securities firms have urged investors to brace for the worst.

“Money has recently flown mostly to secondary battery shares, and some battery shares have been classified as ones that require cautious investment (by the Korea Exchange),” said Kim Dae-joon, an analyst at the Korea Investment & Securities. “If such stocks are not buoyed by an additional buying spree from investors, their prices will be on the path of extreme instability.”