LG Chem, KakaoBank hammered by massive short sale

[Photo by Han Joo-hyung]

Foreigners spooked by anticipated faster tightening by the U.S. central bank are heavily shorting on Korean big caps LG Chem and KakaoBank.

According to Korea Exchange on Thursday, short selling transactions in the main Kospi market reached 682 billion won ($566.8 million), slightly down from 767.9 billion won in the previous day. Foreign investors were the biggest short sellers – 498.8 billion won – followed by institutions (171.4 billion won) and individuals (11.7 billion won).

Short selling is a strategy that allows an investor to profit from a falling stock through borrowed shares. Korea lifted its 15-month ban on short selling in May.

On Thursday, LG Chem was the most heavily shorted stock in the Kospi index with 92.8 billion won shorted, accounting for 19.77 percent of the entire daily Kospi transactions of 469.8 billion won.

Investors dumped LG Chem shares ahead of an initial public offering of its core battery unit LG Energy Solution later this month.

But investors¡¯ shorting of LG Chem will likely be short-lived, said Cho Hyun-ryul, an analyst at Samsung Securities, expecting a recovery in investors¡¯ sentiment toward the stock if its business of secondary battery materials including cathodes and separators finally bear fruit.

[Photo by KakaoBank Corp.]

KakaoBank was also the main target of the recent short selling amid lingering concerns over overvaluation since its IPO last year, with its short sales reaching 47.7 billion won on Thursday. Short sales of Amorepacific shares also stood at 18.1 billion won due to the company¡¯s poor earnings.

Short selling on the secondary Kosdaq market also totaled 188.4 billion won. Foreigners accounted for the largest with 122.5 billion won in short sales, followed by institutions 61.1 billion won and individuals 4.1 billion won.

The most heavily shorted Kosdaq stocks were Kakao Games at 30 billion won, L&F at 15 billion won, and EcoProBM at 9.1 billion won.

Lee Eok-won, vice minister of economy and finance, said that the stock market has reacted to signals of earlier-than-anticipated rate hikes by the U.S. Fed, which has led the U.S. dollar jump against other major currencies and to a plunge in tech stocks in the Nasdaq market overnight in the U.S.

[¨Ï Maeil Business Newspaper & mk.co.kr, All rights reserved]