Shares of POSCO Holdings Inc. (NYSE: PKX) skyrocketed by 20.60% on Monday, marking the highest increase ever recorded. The rally was driven by robust quarterly profits and a frenzied retail buying spree of stocks connected to electric-vehicle batteries.
Notably, the surge in POSCO stock was further amplified by short sellers rushing to cover their bearish bets. Furthermore, a report indicating US House committees investigating Ford Motor Co.’s partnership with a leading Chinese battery maker spurred buying of South Korean rivals, including POSCO.
The South Korean steelmaker, POSCO, achieved its highest stock level since 2007 after recording its bumper quarterly profit in a year. The firm’s strong performance contributed to the gains in the MSCI Asia Pacific Index on Monday. Notably, POSCO has emerged as one of the top gainers in Asia this month, with an impressive climb of up to 76%.
POSCO has been making strategic bets on battery materials, and this indiscriminate buying of companies linked to the EV supply chain is reaping the reward.
Despite some concerns about the surge appearing somewhat excessive, Yoon Joonwon, a fund manager at DS Asset Management, believes POSCO remains “very much confident” in its ability to outpace cathode rivals such as Ecopro BM Co. and L&F Co. in the long-term battery materials race with its massive cash investment.
Short Covering Boosts Rally
Short-sellers have faced disappointment as the gains have gone against their bets. Posco has witnessed a substantial increase in short-selling volume and turnover this month. This surge in short-selling activity is one of the factors contributing to the current rally in the company shares, as stated by An Hyungjin, the CEO of Billionfold Asset Management.
The surge in operating profit in the second quarter came following POSCO’s major investment plan announcement earlier this month. The company has set out to invest $92 billion through 2030 to expand beyond its primary steel operations. The bulk of this investment will be channeled to scale up the production of EV battery materials and venturing into the hydrogen sector.
POSCO’s operating income for the three months ended June 30 was reported at 1.3 trillion won ($1 billion). Though slightly lower than the previous year, it nearly doubled the 705 billion won in the first quarter, surpassing analysts’ expectations of 1.12 trillion won.
US House Committees Investigate Ford Partnership
In another development, Reuters reported that two US House of Representatives committees initiated investigations into Ford’s partnership with Chinese battery company Contemporary Amperex Technology Co. (CATL). Ford announced plans to build a battery plant in Michigan with CATL in February. The House Ways and Means Committee and the Select Committee on China are demanding answers from Ford about the deal.
Edward Cooke is a financial analyst, freelance writer, and editor. He has six years of experience in financial journalism. He has an in-depth understanding of equities markets, tracking major indices and providing real-time analysis on stock price movements, corporate earnings, and market sentiment.
