How far will Youngpoong Paper's limit-down streak go... Growing losses at Kiwoom Securities

Youngpoong Paper, Four Consecutive Limit-Down Days Since Trading Resumption
Major Shareholder Daeyang Metal's Shares Also Sold in Forced Sale
Expecting Low-Price Buying Inflow After Returning This Year's Stock Price Gains

Yeongpung Paper, which had its trading suspended due to allegations of market manipulation, recorded the lower limit price for four consecutive days since resuming trading on the 26th of last month. Although the stock price has plummeted by more than 70% compared to before the suspension, the possibility of further decline is weighted more than a rebound. This is because Kiwoom Securities is executing forced sales to recover margin loans, and there is an increased likelihood that shares held by Daeyang Metal, the largest shareholder of Yeongpung Paper, will flood the market as sell orders.

According to the Korea Exchange on the 1st, Yeongpung Paper's stock price fell 75.9% from 33,900 KRW to 8,170 KRW over four trading days from the 26th to the 31st of last month. During these four days, the trading volume was only 104,235 shares, and the trading value was 1.11 billion KRW.

As Yeongpung Paper's stock price declines, the trading volume is gradually increasing. On the 26th of last month, the trading volume was only 5,438 shares, but it rose to 12,508 shares on the 27th, 19,825 shares on the 30th, and 66,464 shares on the 31st. If the price falls further, low-price buying demand is expected to increase, leading to higher trading volume.

Kiwoom Securities is executing forced sales at market price before the market opens to recover margin loans. As of the 20th of last month, margin loans related to Yeongpung Paper in Kiwoom Securities accounts amounted to 494.3 billion KRW. Margin trading is a very short-term credit transaction where individual investors borrow money from securities firms to buy stocks and repay the settlement amount within two trading days, the actual settlement date. When margin loans occur, securities firms recover the lent money through forced sales. Considering the nature of margin trading, it is estimated that the margin loans related to Yeongpung Paper are the unsettled amounts from margin trades conducted over three trading days from the 13th to the 17th of last month, which were not recovered from the 18th onward. On the 18th of last month, Yeongpung Paper's stock price plunged to the lower limit price and trading volume sharply decreased, and with trading suspended on the 19th, Kiwoom Securities was left with a large amount of margin loans.

Yeongpung Paper's stock price surged 824% from the beginning of this year until the end of August. During September, the stock price moved sideways, showing signs of consolidation. The average daily trading volume for one month before the suspension of Yeongpung Paper's trading reached 6,137,666 shares. The average daily trading value exceeded 290 billion KRW. Even if margin trading occurred, there was no problem recovering margin loans through forced sales.

The problem arose when Yeongpung Paper and its parent company Daeyang Metal hit the lower limit price on the 18th of last month and the Korea Exchange suspended trading from the next day. News also emerged that some members of the group involved in the market manipulation allegations were arrested. They are suspected of creating about 100 accounts at Kiwoom Securities and manipulating the stock price through wash trading and using margin loans. It is known that most of Kiwoom Securities' margin loans originated from accounts used by the market manipulation group.

An official from the financial investment industry explained, "If the margin loans originated from accounts of the market manipulation group, the possibility of repayment is slim," adding, "The stock price is falling while the amount of sell orders is piling up, and margin loans must be recovered by selling Yeongpung Paper shares in the market."

Daol Investment & Securities estimated that Kiwoom Securities' losses would reach 350 billion KRW when Yeongpung Paper's stock price recorded the lower limit price for four consecutive days. If the lower limit price is recorded for one more day, the recoverable amount is expected to be less than 100 billion KRW.

Considering the scale of Kiwoom Securities' margin loans, the number of shares purchased on margin by the market manipulation group amounts to 17 million shares. There may be some variation depending on the average purchase price and margin rates per account. The number of shares with sell orders placed at the lower limit price without being executed the previous day is 26 million shares, accounting for 56% of the total issued shares of 46.48 million. Besides Kiwoom Securities' forced sale volume, general shareholders are also attempting to exit, but trades are not being executed.

On the 30th of last month, Daeyang Metal announced that a lien would be executed on 14.8 million of its shares. Daeyang Metal borrowed 56 billion KRW from NongHyup Bank and Daegu Bank using Yeongpung Paper shares as collateral. Daegu Bank lent 34 billion KRW to Daeyang Metal with 11,125,000 shares as collateral. If Yeongpung Paper's stock price falls below 3,060 KRW, principal loss will occur. NongHyup Bank lent 10 billion KRW with 1,666,667 shares as collateral, and if the shares are sold at 6,000 KRW, the principal can be preserved. If Yeongpung Paper's stock price continues to decline, there is a high possibility that Daeyang Metal will be asked to provide additional collateral. This means that about 60% of the issued shares could effectively become subject to forced sales. This is why it is difficult to predict when Yeongpung Paper's downward trend will stop.

An industry insider analyzed, "When the stock price falls, low-price buying demand can be expected, but the volume of forced sales may also increase," adding, "If the lower limit price is recorded once more, the price will fall to the level of last year's closing price." Yeongpung Paper recorded cumulative sales of 40.9 billion KRW and an operating loss of 600 million KRW on a consolidated basis in the first half of this year. Sales decreased by 27.9% compared to the same period last year, and operating profit turned to a loss.

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