EV battery stocks run out of juice as focus turns to other sectors

People line up to enter a duty-free shop in Myeong-dong in central Seoul on Aug. 11. [YONHAP]

Electric vehicle battery stocks have lost traction in recent weeks as the expected recovery of Chinese tourists put hotels, duty-free shops and cosmetics into the spotlight following China’s lifting of its group tour ban to Korea last week.

Market capitalization for major EV stocks plunged more than 30 trillion won ($22.5 billion) as of Monday from its peak in July 2023.

The market cap for EcoPro, EcoPro BM, Posco Holdings and Posco Future M totaled 142.6 trillion won as of Monday, down almost 18 percent from the peak on July 26, according to data from the Korea Exchange.

EcoPro is a battery materials company and holds 46 percent of EcoPro BM, a cathode producer. Posco Future M is steel giant Posco Holdings' battery material unit.

The stock price for EcoPro and EcoPro BM slid 11 percent and 31 percent respectively, while the price for Posco Holdings and Posco Future M fell 8 percent and 23 percent respectively during the period.

Prices for EV battery stocks skyrocketed last month over the expectation of their addition to the Morgan Stanley Capital International (MSCI) Korea Index, a global stock index published by Morgan Stanley.

EcoPro made it into the index.

Experts say the fear of missing out (FOMO) for EV batteries remains, but a selloff is expected as demand moves onto other sectors.

“The FOMO for EV batteries, which was experienced in July, has not entirely disappeared yet,” according to a report from Kiwoom Securities on Thursday.

Whether the demand shifts to the stocks that are about to rise again, such as bio or cosmetics, duty-free shops and casinos from China’s reopening remains to be seen, the report added.

Retail and hotel sectors gained momentum after China lifted its restriction on group tours to Korea on Thursday with immediate effect.

The stock price for Hotel Shilla soared 19 percent and SK Networks, an operator of Grand Walkerhill Seoul hotel, was up 7.1 percent on Friday.

“If the number of Chinese tourists returns to the level seen in December 2019 — before the pandemic — from 168,000 in June, Chinese tourists that are three times larger in number could open their wallets in Korea,” Korea Investment & Securities analyst Kim Dae-jun said.

Cosmetics, apparel, entertainment, leisure and casino will all benefit, he added. “Their stocks have already jumped, but a clear upward trajectory for the stocks has just begun.”

Analysts had raised warning about the volatility of the EV battery stocks, issuing sell reports for the stocks in early August and citing the overvaluation of an industry that is facing rapidly increasing competition.

Hana Securities set its target price by almost half the value of EcoPro while NH Investment & Securities put EcoPro BM on hold. Goldman Sachs initiated coverage of EcoPro BM in June at sell.

BY JIN MIN-JI [jin.minji@joongang.co.kr]