Meritz Financial in epic fall this year on active shorting, profit taking

[Source: Meritz Financial Group Inc.]

South Korea’s Meritz Financial Group Inc. shares that soared more than 350 percent last year have lost more than 50 percent from its January peak due to active profit taking and short selling triggered by growing financial market uncertainty.

Shares of Meritz Financial Group plunged 40.7 percent so far this year and 53.3 percent from its historic high of 55,900 won ($42.5) in January to 26,100 won on Tuesday. The stock zoomed 348 percent last year alone on the generous buyback policies of its key subsidiaries to be one of the country’s top five best-performing stocks.

Its shares were trading 0.38 percent higher at 26,200 won on Wednesday morning.

Meritz Financial Group is expected to report solid earnings for the April-June period on a consolidated basis, with operating income and net income projected to have gained more than 2 percent and over 10 percent, respectively, from a year ago.

Shorting and profit-taking has been heavy on the stock deemed overpriced after epic ascension last year.

Short selling transactions of Meritz Financial Group reached 10.8 billion won over the past one month, accounting for 16.2 percent of its stock turnover.

Its exposure to property project financing has also raised concerns as the real estate market has turned bearish amid rapidly rising interest rates. According to Korea Ratings, Meritz Financial Group’s real estate project financing exposure as to its equity reached 123 percent as of mid-last year.

Shinhan Investment Corp. revised downward Meritz’s target stock price by 53 percent to 29,000 won from 62,000 won.

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