Amid concerns about an electric-vehicle chasm (demand slowdown), the share prices of secondary-battery-related corporations rebounded sharply this month, putting related exchange-traded funds (ETFs) at the top of the performance table. Global EV sales hit a record high, and rising demand for energy storage systems (ESS) driven by artificial intelligence (AI), along with potential spillover benefits amid U.S.-China tensions, appear to have supported stock gains.
According to Korea Exchange on Oct. 19, through Oct. 17 the ETF with the highest return in the domestic stock market was "KODEX Secondary Battery Industry Leveraged," which surged 51.37%. The ETF tracks at two times the daily return of an index composed of major domestic secondary-battery corporations. When secondary-battery shares rise, it gains twice as much.
The product's return outpaced the 43.29% gain of the "TIGER 200 IT Leveraged" ETF, which invests in domestic semiconductor stocks such as Samsung Electronics and SK hynix over the same period.
News that global EV sales in September recently hit an all-time high appears to have partly eased concerns about stagnating EV demand that had weighed on secondary-battery investor sentiment. In addition, with AI-related investment expanding, ESS demand is expected to increase mainly in North America, and ESS has emerged as a key driver of earnings improvement for secondary-battery corporations.
In addition, expectations are spreading that if exports of Chinese batteries to the United States are restricted amid U.S.-China trade tensions, domestic battery corporations could gain a spillover benefit, and the fact that LG Energy Solution on Oct. 13 announced third-quarter results that beat market expectations is also seen as spurring buying.
Lee Yong-uk, an analyst at Hanwha Investment & Securities, said, "While concerns about downward earnings revisions for domestic secondary-battery sectors after the reduction of U.S. electric vehicle (EV) subsidies had weighed on share prices, expectations for ESS have been growing again recently," and added, "In addition, solid EV demand in the European market and export controls on China's battery materials and technology are working positively for the domestic secondary-battery industry."
However, experts say expectations for earnings improvement at secondary-battery corporations are currently excessively high, and with uncertainty remaining after the abolition of U.S. EV subsidies, it will be difficult for share prices to rise in a sustained trend.
Kim Hyeon-su, an analyst at Hana Securities, said, "U.S. EV sales in September rose 35% from a year earlier, a large increase, but that likely stemmed from preorders ahead of the abolition of EV subsidies, so it is hard to attach great significance," and explained, "With sales growth in the 10% range, the current earnings consensus (the market's average forecast) that expects 70% or more earnings growth is excessive."
Lee Yong-uk noted, "Compared with expectations for ESS growth, the direct benefit for cathode manufacturers is somewhat limited," and pointed out, "Next year's U.S. ESS market is expected to expand around LG Energy Solution's lithium iron phosphate (LFP)-based ESS, but domestic cathode manufacturers are still producing only NCM (nickel-cobalt-manganese) cathodes."