Secondary Battery ETF Running Again, Soaring Returns

Last Month's Lowest Performing Secondary Battery ETF Rises to Top This Month
Short-Term Rebound Driven by Export Volume Increase and Lithium Price Recovery
Concerns Over Renewed Uncertainty in H2 Due to US Presidential Election

Since the second half of last year, lithium-ion battery exchange-traded funds (ETFs) had shown sluggish performance, but they have been recovering this month with high returns. As forecasts suggest that the lithium-ion battery industry has passed its bottom, attention is focused on whether the stock prices of lithium-ion battery companies will begin a full-fledged recovery.

According to the Korea Exchange on the 23rd, as of the 21st of this month, KODEX 2nd Battery Industry Leverage rose 27.43%, recording the highest increase among all ETFs. TIGER 2nd Battery TOP10 Leverage followed with a 25.49% increase. Additionally, KODEX 2nd Battery Core Materials 10 Fn (16.84%), ACE 2nd Battery & Eco-friendly Car Active (16.63%), BNK 2nd Battery Anode Material (16.45%), TIGER 2nd Battery Materials Fn (15.13%), and TIGER 2nd Battery Theme (15.12%) also posted high returns, placing many lithium-ion battery-related ETFs among the top gainers.

Last month, TIGER 2nd Battery TOP10 Leverage fell 36.53%, KODEX 2nd Battery Industry Leverage dropped 33.79%, and KODEX 2nd Battery Core Materials 10 Fn declined 21.21%, showing poor performance. However, this month has shown a completely different trend, raising expectations for recovery.

Jeong Won-seok, a researcher at Hi Investment & Securities, said, "We initially expected a short-term bottom to form between late January and mid-February, when the fourth-quarter earnings announcements were scheduled. In fact, the domestic lithium-ion battery sector's stock prices bottomed on the 25th of last month and rose about 15%." He added, "Domestic lithium-ion battery cell and material companies mentioned in their fourth-quarter earnings reports that the decline in performance would continue into the first quarter of this year. However, we believe these concerns were already priced in as the stock prices adjusted for about a month since the beginning of the year."

Signs of a bottom in the lithium-ion battery industry are also emerging. Kang Dong-jin, a researcher at Hyundai Motor Securities, said, "Although the export prices of cathode materials continued to decline in January, the volume showed improvement compared to the previous month." He added, "We expect the export prices of cathode materials to continue falling at least until March, but from April, the decline is likely to slow significantly or stop." He continued, "With increased predictability of prices, the most important factor is visibility of demand, and the increase in export volume is considered a bottom signal."

According to Hi Investment & Securities, the export weight of battery cells for electric vehicles from Korea in January recorded a positive month-on-month increase. In particular, the export weights of cathode materials and electrolytes turned positive compared to the previous month for the first time in five months and three months, respectively. Although it is difficult to judge the entire quarter based on one month’s data, this is seen as a positive factor for short-term stock price trends.

Researcher Jeong said, "Uncertainty in the upstream market still exists, but due to positive momentum such as the gradual increase in battery cell orders from automakers in the second quarter, the rebound in lithium prices in February after five months, and the increase in export volume, the domestic lithium-ion battery sector’s stock prices are expected to show a short-term rebound with February as the bottom."

However, uncertainty is expected to expand again toward the second half of the year. Researcher Jeong said, "As we approach the second half, uncertainties may become more prominent, so it is necessary to approach from a trading perspective." He explained, "The biggest issue in the second half is the U.S. presidential election scheduled for November. If Donald Trump becomes the Republican final candidate and wins the election, the growth rate of the North American electric vehicle market could slow significantly, which could be a burden on the stock prices of domestic battery cell and material companies that have secured U.S. automakers as their main clients."