(Bloomberg) — Posco Holdings Inc. shares jumped as much as 24% on Monday, the most on record, on strong quarterly profits and frenzied retail buying of stocks related to electric-vehicle batteries.
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The stock also appears to have gotten a boost by short sellers rushing to cover their bearish bets. At the same time, a report that US House committees are investigating Ford Motor Co.’s partnership with a major Chinese battery maker spurred buying of South Korean rivals.
Posco’s shares surged to the highest level since 2007 as the company notched the biggest quarterly profit in a year. It was the biggest contributor of gains to the MSCI Asia Pacific Index on Monday. The stock has been one of the best gainers in Asia this month, climbing as much as 76%.
Retail investors have been driving the gains in Posco, South Korea’s largest steelmaker that has been betting big on battery materials, amid indiscriminate buying of companies related to the EV supply chain.
While the surge looks “somewhat excessive,” Posco seemed “very much confident” that it could beat cathode rivals such as Ecopro BM Co. and L&F Co. in the long-term battery materials race with its massive cash investment, said Yoon Joonwon, a fund manager at DS Asset Management.
The gains have thwarted investors betting on a drop in the shares. Posco has seen a big jump in short selling volume and turnover this month, and so “short covering is partly driving the rally,” according to An Hyungjin, chief executive officer at Billionfold Asset Management.
Posco’s bumper operating profit in the second quarter follows a major investment plan announced earlier this month. The company plans to invest a total of $92 billion through 2030 to take its business beyond its mainstay steel operations. The investment will mainly go into expanding its production of EV battery materials, as well as hydrogen.
The company’s operating income was 1.3 trillion won ($1 billion) in the three months ended June 30. While that’s down from a year earlier, it’s nearly double the 705 billion won in the first quarter, the country’s largest steel producer said Monday. That beat analyst expectations for 1.12 trillion won.
Separately, Reuters reported that two US House of Representatives committees said Friday they are investigating Ford’s partnership with Chinese battery company Contemporary Amperex Technology Co.
Ford said in February that it and CATL plan to build a battery plant in Michigan, and Republican chairs of the House Ways and Means Committee and the Select Committee on China are demanding that Ford answer questions about the deal, Reuters reported.
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