EcoPro to log record-high foreign net purchases in July

South Korean battery materials maker EcoPro Co., the stock price of which has soared more than nine times on the junior bourse Kosdaq since January of this year, is set to post record-high net purchases by foreigners on a monthly basis.

The net buying spree was caused by a short squeeze, a market phenomenon in which an unexpected rise in the price of heavily shorted stock prompts short-sellers to buy the stock and exit their positions, experts said. Foreign investors also flocked to the stock amid expectations that the MSCI Korea Index may include the share in August, they added.

Foreigners’ net buying of EcoPro during the first 21 days in July reached 552.8 billion won ($428.9 million), around seven times foreigners’ net purchase of the stock in the entire month of June, according to the Korea Exchange on Sunday.

Net buying for the first 21 days of July has already exceeded foreigners’ monthly net purchase records of EcoPro since the company was listed in 2007. The previous record on a monthly basis was 209 billion won in February of this year.

Foreigners, who net sold EcoPro stock for three consecutive months from March, turned to net buying in June and significantly increased their purchases of the stock this month.

The buying spree for EcoPro is likely due to foreigners’ short squeeze rather than the battery maker’s fundamentals, said Chung Won-suk, an analyst at Hi Investment & Securities Co.

The number of EcoPro stocks sold short and yet to be bought was about 1.66 million on June 30 and dropped to 1.11 million as of July 18, which means investors purchased about 500,000 shares to exit from their short positions during the period.

Some analysts say foreigners flocked to buy EcoPro as the stock is one of the candidates for inclusion in the MSCI Korea Index next month.

The index will certainly include EcoPro, said Samsung Securities Co. analyst Kim Dong-young. MSCI Korea is highly likely to reflect EcoPro’s share price on July 18-20 as the reference dates, and given the assumption, the probability of the inclusion is estimated to be 100%, Kim added.

The top stock on the Kosdaq closed at 1.14 million won on July 21, hitting its record high since it debuted on the market in 2007. It reached as high as 1.19 million won during trading hours on the day.

Some experts warn that the overheated stock will turn bearish soon.

Although it is hard to predict the share’s ups and downs, the current price is too high and investors should keep in mind that the stock could fall, said Wee Kyung-jae, analyst at Hana Securities Co.

The share could decline in the second half of this year, said Hi Investment & Securities’ Chung.

Write to Eui-Myung Park at uimyung@hankyung.com
Jihyun Kim edited this article.