Battery and pharma stocks surge after short-selling ban

EV battery and pharmaceutical stocks experienced following the latest ban on short selling, with EcoPro and L&F seeing surges in trading.

EcoPro share price soaring near the daily maximum trading ceiling on the Kosdaq market is shown on a screen at the Korea Exchange in western Seoul on Monday. [NEWS1]

EV battery and pharmaceutical stocks with high short interest traded strong on Monday following the latest ban on short selling.

EcoPro, a cathode supplier, hit the Kosdaq market ceiling, closing at 828,000 won ($637.66), up 29.98 percent from the previous trading day. EcoPro stocks have spearheaded the battery frenzy this year through the summer, and have been plunging since August after their price peaked at over tenfold from the beginning of the year.

EcoPro BM, a battery material subsidiary of EcoPro, spiked to 299,000 won, up 30 percent, also reaching the maximum trading limit.

EV battery stocks, including EcoPro, are known to have high short interest — which indicates the number of short-sold shares that are yet to be covered — due to concerns of overvaluation following the previous EV battery fever and demand slump.

EcoPro’s short interest stands at 6.35 percent of its total outstanding shares, which is the fourth highest among Kosdaq-listed companies, according to a Kyobo Securities report on Monday.

L&F, a cathode materials supplier, has short interest of 6.63 percent and soared 25.30 percent to close at 187,700 won on the Kosdaq.

The main drivers of the latest short-selling ban rally are considered to be on a buying spree triggered by retail investors’ expectations of price hikes, as well as possible purchasing from short sellers who are reclaiming borrowed shares.

Pharmaceutical and biotechnology stock prices have also traded strong following the short-selling ban.

Kosdaq-listed HLB, a pharmaceutical and health care company, advanced 14.38 percent to close at 33,400 won. HLB has short interest of 7.24 percent, the highest among Kosdaq-listed companies.

Humasis, a medical device supplier with the second-highest short interest of 6.98 percent, rose 12.8 percent on Kosdaq to 2,380 won.

Yuhan, a pharmaceutical company, rose 6.57 percent to 63,300 won on the Kospi, and Celltrion increased 5.34 percent to 157,900 won.

Bio and pharma stocks performed well during the previous short-selling ban in 2020, which followed the outbreak of the Covid-19 pandemic, as well.

“As pharmaceutical companies focusing on new drug discoveries are more easily affected by the supply and demand in the stock market, rather than earnings-based valuations, the impact of short selling in the sector is evident,” said Lee Dong-geon, SK Securities analyst.

“Though a short-selling ban alone is not guaranteed to result in short covering, the companies that have seen their share prices plunge or move sideways due to the supply and demand situation in the market, rather than the issue of fundamentals, will benefit [from the short-selling ban],” said Lee.

BY SHIN HA-NEE [shin.hanee@joongang.co.kr]