By Lee Min-hyung
A price bubble of biotechnology stocks listed on the junior Kosdaq is showing signs of bursting, shortly after the partial lifting of a ban on the short-selling of shares.
Over the past year, biotech firms have seen their share prices rise much faster than other sectors in South Korea. Also, the overall growth rate of so-called big bio firms far surpassed those other promising sectors, such as info-tech and secondary batteries.
Biotechnology stocks are still considered to be "highly vulnerable" to further price declines over the short term, but the partial resumption of short-selling, in itself, would not pose a serious threat to their medium- to long-term stock prices.
"The trading volume of short sellers will determine the future course of bio stock prices," Eugene Investment & Securities analyst Han Byung-wha said, adding that bio stocks are seen as overvalued due to their categorization as "growth stocks" with investors betting on their future value, rather than short-term profitability.
In the meantime, issuance of biotech equities is surging mostly because of the rising stock prices of biotech companies. While additional growth momentum in terms of market shares and profits appears to exist to some degree, stock investors who parked their money in biotech stocks are largely seen as being interested in short-term gains.
The Financial Services Commission (FSC) on Monday resumed short-selling partially for the KOSPI 200 and Kosdaq 150 stocks. Stocks in the areas of biotechnology and healthcare were hit hardest by the resumption of the trading practice after it was suspended in March last year. Stock prices of major Kosdaq-listed bio shares ― such as Celltrion Healthcare, HLB, Alteogen and Seegene ― plunged on the first day short-selling resumed.
Amid the widening price volatility of some bio shares, the Korea Exchange, the bourse operator, on Tuesday imposed a one-day short-selling ban on 22 stocks ― four in the benchmark KOSPI and the others listed on the Kosdaq.
Most of the 18 Kosdaq stocks are biopharmaceutical issues whose valuations fluctuated on Monday due to the short-selling-sparked market uncertainty. The bio-led Kosdaq 150 fell 3.12 percent on Monday compared to the previous session. This was a bigger drop than the KOSPI 200's fall of 0.47 percent during the same period.
The stock price of Shin Poong Pharm, which is included on the list of the four KOSPI-listed short-selling-banned stocks, also nosedived 12.18 percent on Monday amid the resumption of short-selling.