Paladineoni... Foreign Investor Sentiment Focused on Secondary Batteries

LG Chem, Samsung SDI, and Others Rank High in Foreign Net Purchases

[Asia Economy Reporter Minwoo Lee] Foreign investors are pouring funds into secondary battery-related stocks. Despite foreign securities firms halving their target prices and issuing sell recommendations in May, steady buying has continued for over a month. This is interpreted as bottom-fishing ahead of an industry recovery in the second half of the year.

According to the Korea Exchange on the 8th, foreign investors have net purchased LG Chem worth 279 billion KRW so far this month until the previous day. This is the largest amount among all foreign net purchases. Secondary battery-related stocks such as Samsung SDI (175.4 billion KRW, 2nd) and SK IE Technology (52.8 billion KRW, 5th) accounted for more than half of the top net purchases. During this period, foreign investors net sold a total of 640.3 billion KRW in the KOSPI market but bought these stocks.

Supported by this, stock prices continued their upward trend. LG Chem rose about 2.9% so far this month until the previous day. Samsung SDI increased by 7.3%, and SK IE Technology rose by 8.7%. This contrasts with the KOSPI, which fell 0.35% during the same period.

In particular, despite foreign securities firms issuing 'sell' investment opinions on LG Chem and Samsung SDI in May, foreign investors steadily poured funds into these stocks. Earlier, Credit Suisse (CS) Securities lowered LG Chem's target price by about 48%, from 1.3 million KRW to 680,000 KRW, on the 25th of last month and issued a 'sell' rating. The reason was that investors had no reason to buy the parent company's shares as LG Energy Solution, LG Chem's secondary battery business subsidiary, was about to go public. However, foreign investors sold LG Chem worth 340 billion KRW on May 26 and 27 but then started buying LG Chem again. Except for only seven trading days from last month until the previous day, they continued net buying.

A similar trend appeared in Samsung SDI. On May 31, US Morgan Stanley lowered Samsung SDI's target price to 550,000 KRW and suggested reducing exposure, citing expected intensified competition among electric vehicle (EV) secondary battery manufacturers. However, foreign investors net sold Samsung SDI for only eight trading days from last month until the previous day. During this period, foreign investors bought Samsung SDI shares worth 410.9 billion KRW.

This is interpreted as bottom-fishing based on the judgment that secondary batteries have entered a structural growth phase. These companies are regarded as steadily growing regardless of economic fluctuations. Wonseok Jung, a researcher at Hi Investment & Securities, said, "There is no doubt about the steep growth potential of the electric vehicle market in the future," adding, "Especially in the second half of the year, compared to the first half when stock price corrections were large, a favorable environment for the secondary battery sector will be created due to new orders for electric vehicle batteries from automakers, easing of vehicle semiconductor supply, and new expansions by secondary battery cell manufacturers."

It is also analyzed that LG Chem, which is spinning off and listing its secondary battery business unit LG Energy Solution, will be relieved of burdens and recover its past stock price. Since it continues battery material businesses such as cathode materials necessary for secondary batteries, it is expected to grow together with the secondary battery industry. Hyuntae Kim, a researcher at BNK Investment & Securities, explained, "The supply and demand dispersion effect due to LG Energy Solution's listing may be a burden around the IPO, but since its own businesses such as advanced materials and life sciences are growing rapidly, it will eventually reach a fair value," adding, "Even after the IPO, LG Chem remains the controlling shareholder holding 80% of LG Energy Solution's shares, and with the acceleration of battery material business expansion, a revaluation of the core business value is expected."

This content was produced with the assistance of AI translation services.