[MarketING] The Underdog of KOSDAQ: Secondary Battery Stocks

KOSPI Rises After 5 Days
KOSDAQ Continues Decline for 6th Day

The KOSPI closed higher after five days of decline. The KOSDAQ continued its downward trend for the sixth consecutive day. The secondary battery stocks, which had previously led the relative strength phase of the KOSDAQ compared to the KOSPI, have been dragging down the KOSDAQ due to recent sell-offs and various negative factors, showing weakness day after day.

Mixed trends in the domestic stock market... KOSPI rises while KOSDAQ falls

On the 15th, the KOSPI closed at 2,479.35, up 3.93 points (0.16%) from the previous session. The KOSDAQ ended the day at 814.53, down 7.9 points (0.96%). The KOSPI managed to rebound before the close, but the KOSDAQ only managed to reduce its losses.

[Image source=Yonhap News]

Institutions drove the KOSPI's rise, while foreigners led the KOSDAQ's decline. On that day, institutions were the sole net buyers in the KOSPI market, purchasing 144 billion KRW. Individuals sold 101 billion KRW, and foreigners sold 50.9 billion KRW. In the KOSDAQ market, foreigners were the sole sellers, pulling the index down. Foreigners net sold 116.7 billion KRW, continuing their net selling streak for eight consecutive trading days. Although institutions bought 81.3 billion KRW and 48 billion KRW, they could not prevent the index from falling.

Kim Seok-hwan, a researcher at Mirae Asset Securities, said, "The domestic stock market shifted to mixed trends after a period of weakness. Due to ongoing uncertainties over the U.S. debt ceiling negotiations and recession concerns, the market showed a downward trend but then the KOSPI reversed to an upward trend late in the session as the won-dollar exchange rate's rise narrowed and the Chinese stock market turned positive. The KOSDAQ, which had been falling more than 1% due to declines in large secondary battery stocks, also narrowed its losses."

EcoPro BM and EcoPro continue to decline. On that day, EcoPro BM fell 1.76%, and EcoPro dropped 4.23%. EcoPro has been on a six-day losing streak recently, and EcoPro BM showed an upward trend only once during the same period. This month alone, EcoPro has fallen 28.63%, and EcoPro BM has dropped 16.29%. The stock price of EcoPro, which was in the 700,000 KRW range at the beginning of the month, quickly fell to the 500,000 KRW range. The continued decline of the top two companies by market capitalization has weighed on the KOSDAQ, pulling the index down.

In addition to ongoing sell-offs following a sharp rise earlier this year, recent negative factors such as owner risk and failure to be included in the Morgan Stanley Capital International (MSCI) index have further weakened the stock prices. Researcher Kim explained, "Due to the highlighted owner risk of EcoPro and the failure to be included in the MSCI index, investment sentiment across the sector has sharply contracted."

EcoPro was recently not newly included in the MSCI Korea index. Initially, EcoPro was expected to be included this time, but excessive stock price gains became a stumbling block. MSCI excludes stocks from inclusion if their relative returns compared to the same sector exceed 400% over the last 60 trading days from the stock selection criteria trading days, classifying them as stocks with rapid price increases.

Owner risk was also highlighted. On the 11th, the Criminal Division 5 of the Seoul High Court sentenced Lee Dong-chae, chairman of the EcoPro Group, to two years in prison and ordered his detention in court for gaining unfair profits worth approximately 1.1 billion KRW by using insider information.

Secondary battery stocks that led the rise now become a factor in index weakness

The sharp decline of EcoPro and EcoPro BM has led to a contraction in investor sentiment toward secondary battery stocks and a decrease in overall market trading volume. The daily trading volume of the KOSDAQ, which reached 1.6 to 1.7 trillion KRW in mid-April, has recently fallen to 800 to 900 billion KRW.

Choi Yoo-jun, a researcher at Shinhan Investment Corp., said, "As caution over domestic and international variables increased, trading volume decreased, especially due to reduced trading in secondary battery-related stocks. After a rally since March, secondary battery stocks experienced a correction, which significantly increased the decline in trading volume."

The stock price of EcoPro, which was a driving force behind the KOSDAQ's rise, is now exerting downward pressure on the KOSDAQ. Kang Jae-hyun, a researcher at SK Securities, explained, "As EcoPro's stock price shows weakness, the KOSDAQ index has also struggled. Looking back at the 2021 bull market before EcoPro, when Kakao was the leading stock, the KOSDAQ also weakened as Kakao peaked and began to decline."

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