[MarketING] Easing of Secondary Battery Concentration Amid 'Overheating Warning'

KOSPI Closes Higher for 5th Day, Surpasses 2560
Profit-Taking Emerges Amid Overheating Concerns in Secondary Battery Stocks
Funds Shift to Pharmaceutical and Bio Stocks

The KOSPI continued its upward trend for the fifth consecutive trading day. While secondary battery stocks, which had been strong, showed weakness due to profit-taking, the supply and demand that had been concentrated in secondary batteries shifted to sectors such as pharmaceuticals and bio, easing the supply-demand imbalance.

KOSPI recovers to 2560 level after 5 consecutive days of gains

On the 13th, the KOSPI closed at 2,561.66, up 11.02 points (0.43%) from the previous day. The KOSDAQ ended the session at 894.25, rising 3.63 points (0.41%).

[Image source=Yonhap News]

The KOSPI, which started lower, fluctuated around the flat line before successfully turning upward near the close. Similarly, the KOSDAQ, which also started down, turned to an upward trend in the afternoon. Institutions and foreigners led the index gains. Institutions net bought 489.4 billion KRW in the KOSPI market, and foreigners purchased 94.2 billion KRW in the KOSDAQ market. Individuals sold 167.4 billion KRW in the KOSPI market and 62.8 billion KRW in the KOSDAQ market, respectively.

Kim Seok-hwan, a researcher at Mirae Asset Securities, explained, "Despite relief over the slowdown in U.S. inflation, concerns about a recession outlook in the Federal Open Market Committee (FOMC) minutes caused a weak start. However, the Korean won's strength during the session expanded foreign buying in the KOSDAQ." He added, "Pharmaceutical stocks rose in the KOSPI, entertainment and gaming sectors increased in the KOSDAQ, while secondary battery stocks saw profit-taking." On the day, the won-dollar exchange rate fell by more than 15 won following news of foreign exchange swaps by the foreign exchange authorities and the National Pension Service.

Secondary battery stocks, which had been rising sharply, showed weakness. On the day, EcoPro fell 5.16%, and EcoPro BM dropped 2.72%. POSCO Holdings, which had also risen sharply on lithium value expectations, declined 3.69%. EcoPro continued its steep decline following nearly a 17% drop the previous day. This is interpreted as a result of overheating warnings as securities firms consecutively downgraded their investment opinions due to concerns over stock overheating. On the day, Kyobo Securities downgraded POSCO Holdings from 'Buy' to 'Neutral,' judging the stock to be in an overbought zone. Baek Kwang-je, a researcher at Kyobo Securities, said, "The recent stock price surged due to the market's secondary battery supply-demand concentration highlighting POSCO Holdings' lithium business value. While the future growth potential of new businesses and the company's new business direction are positive, the rapid stock price rise due to market theme formation and supply-demand concentration is excessive." Kyobo Securities also downgraded EcoPro BM's investment opinion from 'Buy' to 'Hold,' citing limited additional upside potential reflecting the current overheated stock price level.

The previous day, Hana Securities issued a 'Sell' rating on EcoPro. Kim Hyun-soo, a researcher at Hana Securities, stated, "The current market capitalization has exceeded the expected corporate value five years from now, and a considerable period of adjustment is needed to confirm mid-term earnings. Although it is a great company, it is difficult to consider it a good stock at this point."

Supply-demand imbalance eases as secondary battery demand shifts, restoring balance

The supply-demand that had been concentrated in secondary batteries is gradually shifting to other sectors and stocks, alleviating the supply-demand imbalance.

The demand that left secondary batteries is moving to other major sectors that had been neglected, such as pharmaceuticals, bio, automobiles, and semiconductors. This effect is particularly noticeable in pharmaceutical and bio stocks. On the day, the KOSPI pharmaceutical sector rose 2.06%, recording the largest gain among KOSPI sector indices. The KOSDAQ pharmaceutical sector also increased by 1.09%. Heo Hye-min, a researcher at Kiwoom Securities, said, "Key factors for the rise in pharmaceutical and bio stocks include the rotation of supply-demand that had been concentrated in secondary battery-related stocks, expectations for the end of the U.S. interest rate hike cycle alongside domestic rate freezes, and maximized supply-demand effects due to neglect over the past 2-3 years."

Choi Yoo-jun, a researcher at Shinhan Investment Corp., analyzed, "As the supply-demand concentration on secondary battery stocks eases, signs of supply-demand balance recovery within the stock market are emerging. Expectations for normalization of the distorted market structure are also at play." He added, "However, if additional selling pressure on secondary battery stocks occurs, the index's upward momentum may be limited, and sector-specific responses are expected to be more rational."

There is an opinion that attention should be paid to stocks with relatively less valuation burden within the secondary battery sector. Lee Anna, a researcher at Yuanta Securities, said, "Although valuation pressure continues mainly on cathode materials, the reason to still focus on the secondary battery sector is the ongoing order momentum. From 2025 onwards, a supply shortage compared to demand in the U.S. is expected, so order and expansion momentum centered on secondary battery cells and cathode materials is expected to continue. However, for companies expanding new business proportions, attention should be focused on those with relatively lower valuation burdens."

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