Secondary Battery ETFs Lose Steam... "Now Is the Time for Bargain Hunting and Long-Term Investment"

Secondary Batteries Are a National Growth Sector
Correction Phase Increases Investment Appeal
"ETFs Build Portfolios with the Most Competitive Stocks Within the Theme"
Vertically Integrated EcoPro and POSCO Group Stocks Draw Attention
LG Energy Solution and Samsung SDI Also Noteworthy for Profit Growth

Will the stock market adage "sell in euphoria, buy in fear" also apply to the secondary battery sector? As investment enthusiasm for secondary battery exchange-traded funds (ETFs) has cooled compared to the beginning of this year, some experts suggest that now may be an opportunity for long-term investors to buy at a low point. This advice is based on the expectation that investment drivers stemming from government policies and changes in industrial structure will remain valid.

According to the Korea Securities Depository's securities information portal on October 18, the 'TIGER Secondary Battery Theme' ETF from Mirae Asset Global Investments, which has the largest net asset value among domestic secondary battery-related ETFs, recorded a three-month return of -14.36% as of October 16. The 'KODEX Secondary Battery Industry' ETF from Samsung Asset Management, the second largest by net asset value, posted a return of -17.21% over the same period. The 'TIGER Secondary Battery Materials Fn' ETF also recorded -13.77%, while the 'Secondary Battery Materials & Equipment Fn' ETF from Shinhan Asset Management posted -15.87%. In this environment, individual investors have also shown increasing interest in inverse ETFs that profit from declines in the secondary battery market.

After a surge in secondary battery stocks in the first half of this year, the related ETF market has entered a correction phase. The price of lithium, a key raw material for batteries, has also fallen, leading to downward revisions in earnings forecasts for related stocks and a general deterioration in investor sentiment. Cathode material companies typically sign supply contracts that link mineral prices to sales prices, so a drop in lithium prices negatively impacts their profitability. Jung Heehyun, head of ETF management at Mirae Asset Global Investments, explained, "Volatility in stock prices has increased as forced liquidations were triggered in stocks with overheated prices and a high proportion of individual investors."

However, experts advise that from a long-term perspective, now is a good time to consider investing in secondary battery ETFs. They argue that the sector's long-term growth potential remains robust, despite the current correction following an earlier surge. Kim Sunghoon, head of the ETF business division at Hanwha Asset Management, emphasized, "Secondary batteries are a representative field in which Korea continues to expand its potential competitiveness after semiconductors," adding, "The country will continue to strengthen its core competitiveness in secondary batteries and the transition to electric vehicles at the national level." Kim also noted, "Given this premise, long-term investment in inverse ETFs should be approached with caution. Instead, now is the time to examine which secondary battery companies will continue to build competitiveness and establish themselves as global leaders." He further suggested, "Investing in key materials and minerals for the Fourth Industrial Revolution, including lithium, is also a viable strategy."

Seo Bokyung, a manager at Samsung Asset Management, commented, "Compared to July, when valuation pressures were particularly high, the price burden of related thematic stocks has now eased considerably." She added, "A series of positive developments for domestic secondary battery companies, such as signing supply contracts with foreign automakers, are attractive factors that can satisfy demand for bargain hunting." Seo also pointed out, "Even if the overall industry is promising, individual stocks may be left out of the benefits," and explained, "ETFs are efficient and stable because they construct portfolios by selecting the most competitive stocks within the theme group."

Jung Heehyun stated, "Since it is difficult for prices to fall below production costs, lithium prices are expected to show downward rigidity in the fourth quarter." He continued, "As the U.S. electric vehicle market grows and domestic secondary battery companies' sales growth becomes visible in the numbers, this will once again support a rise in stock prices." He added, "Given the high likelihood that they will meet subsidy requirements for raw material procurement compared to competitors, attention should be paid to vertically integrated cathode material companies such as EcoPro Group and POSCO Group. Cell manufacturers like LG Energy Solution and Samsung SDI, which are expected to see steady profit growth, are also worth watching."

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