Posco jumps the most ever on windfall profits and EV battery bets

(Bloomberg) – Shares of Posco Holdings Inc. jumped as high as 24% on Monday, the highest on record, on strong quarterly earnings and frenzied retail buying of stocks related to electric vehicle batteries.

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The stock also appears to have been boosted by short sellers who rushed to hedge their bearish bets. Meanwhile, a report that U.S. House committees are investigating Ford Motor Co.’s partnership with a major Chinese battery maker has spurred buying from South Korean rivals.

Shares of Posco soared to their highest level since 2007 as the company posted the biggest quarterly profit in a year. It was the biggest contributor to gains in the MSCI Asia Pacific Index on Monday. The stock was one of Asia’s top gainers this month, climbing as high as 76%.

Retail investors were behind gains at Posco, South Korea’s biggest steelmaker which bet big on battery materials, amid indiscriminate buying from companies linked to the electric vehicle supply chain.

While the upside seemed “somewhat excessive,” Posco seemed “very confident” that it could beat cathode rivals such as Ecopro BM Co. and L&F Co. in the long-term race for battery materials with its massive cash investment, said Yoon Joonwon, a fund manager at DS Asset Management.

The gains thwarted investors betting on a decline in stocks. Posco saw a surge in short-selling volume and revenue this month, and so “short coverage is partly driving the rally,” according to An Hyungjin, managing director of Billionfold Asset Management.

Posco’s bumper second-quarter operating profit follows a major investment plan announced earlier this month. The company plans to invest a total of $92 billion through 2030 to expand its business beyond its core steel business. The investment will go mainly to expanding its production of materials for electric vehicle batteries, as well as hydrogen.

The company’s operating profit was 1.3 trillion won ($1 billion) in the three months ended June 30. Although that’s down from a year earlier, it’s nearly double the 705 billion won in the first quarter, the country’s biggest steelmaker said Monday. It beat analysts’ expectations for 1.12 trillion won.

Separately, Reuters reported that two U.S. House of Representatives committees said on Friday they were investigating Ford’s partnership with Chinese battery company Contemporary Amperex Technology Co.

Ford said in February that it and CATL planned to build a battery plant in Michigan, and the 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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