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Fears escalate over steep price adjustment of battery shares
By Lee Min-hyung
The recent "battery fever" of investors is showing signs of losing steam after some secondary battery shares displayed wilder fluctuations than cryptocurrencies in what analysts said may spark a possible credit crisis in the local stock market.
Up until recently, some of the battery materials stocks here picked up weeks-long momentum for a monster rally, with an increasing number of investors engaging in a buying spree of shares such as EcoPro and POSCO Holdings, amid the heightened fear of missing out.
Yet, what appeared to be an unquenchable rally did not last long, as the shares that drove the recent battery frenzy are now losing steam with steep price falls this month.
The price volatility of battery shares is comparable in its extremity to cryptocurrencies. Shares of EcoPro ― one of the red-hot battery materials manufacturers here ― soared to a historic high of 1.53 million won ($1,173) on July 26, but its value tumbled to 935,000 won two days later. This is a drop of approximately 39 percent, a big fluctuation rarely seen in the local stock market.
Other battery-related stocks have also displayed worrisome fluctuations in their stock value for no apparent reason.
POSCO Holdings shares have also moved in a downward trajectory after steeply rising to a historic high late last month. The firm's stock value soared around 65 percent in less than a month. But it appears to have lost momentum for further rallies, just like other attention-grabbing battery materials shares.
The battery stock volatility is even greater than that of cryptocurrencies, which also have a similar market capitalization. EcoPro is comparable to Ripple's XRP token. The market cap of both stands at around 30 trillion won each. But data showed that the Korean battery stock displayed a wider fluctuation than XRP in the last week of July.
The price of XRP moved in a range of around 5 percent for five trading days from July 24, according to data from crypto market tracker, CoinMarketCap. However, that of EcoPro showed a wilder fluctuation of as much as 40 percent during the same period.
Data from the Korea Exchange also showed foreign investors are engaged in a selling spree of EcoPro shares worth 211.2 billion won in the secondary Kosdaq between Aug. 1 and Aug. 7. This was in sharp contrast to their buying spree last month when they purchased the firm's stocks worth 1.15 trillion won amid the then-escalating secondary battery fever.
Shares of POSCO Holdings also fluctuated around 24 percent during the last week in July. The price of BNB, a cryptocurrency whose market cap is close to that of POSCO's holding firm among listed cryptocurrencies, moved in a much smaller margin of less than 2 percent during the same period.
Kumyang and LS Electric, two other battery-linked shares that drew the attention of investors, were no exception. Kumyang shares displayed volatility as high as 30 percent during the same period. Solana, the world's ninth-largest cryptocurrency, is comparable to Kumyang, having a similar level of market capitalization. Nevertheless, Solana's valuation fluctuated within a margin of only 10 percent.
LS Electric shares also displayed a steep curve with a fluctuation of more than 30 percent, bigger than that of Chainlink at around 10 percent.
With the battery stocks rapidly losing the spotlight, market experts voiced concerns over the possibility of an additional price adjustment, warning against potential credit risk in the local securities industry.
"The credit transaction on the benchmark KOSPI and tech-savvy Kosdaq recently soared to more than 20 trillion won amid a rapid buying spree of secondary battery shares, so it is reasonable to leave open the possibility of the credit crisis in the stock market here," Kiwoom Securities analyst Han Ji-young said.
According to data from the Korea Financial Investment Association, the credit transaction balance reached 20.06 trillion won as of July 25. This was the first time since April that the figure topped the 20-trillion mark after a stock manipulation scandal swept across the nation at that time.