After 30% rally, Korean battery and materials stocks are set to go higher

[Provided by Maekyung Media Group]

Shares of South Korea’s battery and materials makers rallying more than 30 percent in the last month as an area dubbed to stay unaffected by global downturn have been bet to go higher.

Since the start of October, shares of battery winners LG Energy Solution Ltd., Samsung SDI Co. and Posco Chemical Co. have advanced more than 30 percent, far exceeding the benchmark Kospi’s 7.3 percent gain during the same period.

Still analysts think the stocks have room to run higher, given the thin short positioning in margin accounts.

Short-selling tends to increase when shares rise sharply but that’s not the case for battery makers, analysts found.

Short-selling accounted for about 6.63 percent of the total trading of 215.6 billion won ($155.7 million) for LG Energy Solution on Monday. Of the total trading worth 196.6 billion won for Samsung SDI, shorting portion was just 3.31 percent. In case for Posco Chemical, shorting took up 6.07 percent of the total 182 billion won trading.

The balance of short-selling for these battery stocks is also low. As of Nov. 2, short-selling balance for LG Energy Solution was 0.6 percent, Samsung SDI 0.46 percent and Posco Chemical 1.03 percent.

Funds waiting for short-sale average at 66 trillion won in the second half of this year, according to the Financial Investment Association. That compares with more than 80 trillion won at the end of last year and currently stands at 69.95 trillion won.

Analysts also forecast gains in battery shares as they are expected to benefit from automakers weaning away from reliance on Chinese companies after the U.S. Inflation Reduction Act went into effect. This will mean Korean battery makers’ market share will grow.

Battery stocks were the top pick by KB Securities Co.

LG Energy Solution shares were down 0.68 percent at 583,000 won during mid-day trading on Tuesday. Samsung SDI and Posco Chemical also dropped 2.03 percent and 2.33 percent, respectively, to 724,000 won and 209,500 won.

By Park Yoon-ye and Kyunghee Park