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Repeated Fluctuations Around 1 Million Won After Surpassing 1 Million Won During Trading
Short Selling Forces Expected to Counterattack...Positive Factors Including Expected Inclusion in August MSCI Korea Index

Earlier this year, opinions sharply diverged between the Yeouido securities market and individual investors regarding the secondary battery material company Ecopro. At the time, while individual investors anticipated further price increases considering future growth potential despite the stock’s high price-to-earnings ratio (PER) indicating overvaluation, securities experts predicted a decline, saying "it’s time for the stock to return to its proper value." Amid the debate, short sellers bet on a price drop. Now, after about six months, it appears that individual investors have emerged victorious.

According to the Korea Exchange, Ecopro closed at 956,000 KRW on the KOSDAQ market on the 13th, up 3.91% from the previous day. During the session, it surged to 994,000 KRW, briefly challenging the position of the market’s top stock. Although it fell following a disappointing Q2 earnings announcement compared to market expectations, it rebounded within a day. On the 14th, Ecopro opened at 967,000 KRW and as of 9:15 AM, it was trading at 981,000 KRW, up 2.62%.

In the securities industry, there is keen interest in whether Ecopro, which briefly surpassed 1 million KRW on the 10th to claim the top stock position, can maintain that status. Beyond the question of becoming the top stock, Ecopro’s price rally is attracting attention because it rose rapidly to an unprecedented level in a short period. Just a year ago, Ecopro’s stock price was only 67,500 KRW, but now it is eyeing the 1 million KRW mark, representing a return of over 1300%.

The driving force behind Ecopro’s price surge is individual investors. Since the beginning of the year, individual investors have purchased Ecopro shares worth 1.72 trillion KRW, making it the second most bought stock after POSCO Holdings (5 trillion KRW) across both KOSPI and KOSDAQ. Following Ecopro are Ecopro BM (1.165 trillion KRW), SK Innovation (673.5 billion KRW), and LG Chem (612 billion KRW). In contrast, institutions sold 763 billion KRW worth of Ecopro shares, and foreigners sold 936.4 billion KRW worth.

While returns vary greatly depending on the timing of purchases and sales, a simple calculation shows that the average purchase price for individuals since the start of the year is 529,376 KRW, suggesting an estimated average return of around 70%.

"Cannot explain the rise" vs "Investing based on the future of secondary batteries"

Securities experts appear bewildered by Ecopro’s rapid price increase. One financial investment industry insider briefly commented, “They say it’s a price at a level of madness, and that’s exactly right.” Another explained, “In a poor domestic and international environment with recession and interest rate hikes, usually a sector-specific rally occurs, but since investor sentiment has sharply concentrated on one stock, except for Ecopro and a few others, the market remains sluggish.”

Research centers at securities firms are also cautious about commenting on Ecopro. Despite it being the Q2 earnings announcement season, the last reports on Ecopro were published two months ago by Hana Securities and Samsung Securities. Both firms stated that Ecopro’s market capitalization had long exceeded its fair value and set investment ratings at ‘Sell’ and ‘Hold,’ respectively, with target prices of 450,000 KRW and 400,000 KRW.

While experts voice concerns about irrational investment, individual investors do not agree with their calculations. Even in May, when sell reports were issued in the domestic securities market, some supported Ecopro’s rise based on the growth of the secondary battery market. Recently, stock communities and discussion forums have been filled with posts certifying returns of thousands of percent. Among individuals who did not invest in Ecopro, some express relative deprivation and suffer from FOMO (Fear of Missing Out) syndrome.

Individual Investors vs Short Sellers... Individuals Gain the Upper Hand?

As Ecopro’s stock price continues to rise, the market is evaluating that individual investors have neutralized the short sellers. This analysis is based on the idea that Ecopro’s price increase stems from short sellers’ ‘short covering.’ Short covering refers to investors who had shorted the stock buying shares again to reduce losses when expecting the price to rise. As individuals kept pushing Ecopro’s price up, short sellers, unable to profit, quickly bought back shares.

According to Korea Exchange’s short selling portal data, as of the 7th, the short selling balance was 1,299,870 shares, down more than 28% from 1,806,130 shares on the 1st of last month. A decrease in short selling balance is interpreted as short sellers buying back shares, i.e., engaging in short covering. Despite the recent price surge, the reduction in balance suggests a short squeeze occurred. Simply put, if short sellers sold shares at 562,000 KRW on the 1st of last month and repurchased them at 965,000 KRW on the 10th, they likely incurred a loss of about 400,000 KRW per share. Currently, major holders of large short selling balances include Morgan Stanley, Goldman Sachs, and Merrill Lynch.

However, it appears that short sellers have not completely withdrawn, as the loan balance is gradually increasing. An increase in loan balance does not definitively mean more short selling, but generally, the more people intending to short sell, the higher the loan balance. As of the 19th of last month, the loan balance was about 4.72 million shares, decreasing to 4.35 million shares on the 5th of this month due to increased stock repayments. However, on the 6th, 10th, 11th, and 12th, loan contracts totaling around 290,000 shares and about 110,000 shares on each of the latter three days were executed, increasing the loan balance to 4.48 million shares.

Although a counterattack by short sellers is expected, individual investors seem unfazed. Instead, they anticipate positive factors such as the August corporate briefing and inclusion in the Morgan Stanley Capital International (MSCI) Korea Index. Researcher Lee Jaerim of Shinhan Investment Corp. predicted, “Following the August MSCI review, Ecopro, Hanwha Ocean, and JYP Ent. are expected to be included.”

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