- Funds looking to short shares in a South Korean power plant builder are meeting the resistance of retail investors rushing to strengthen the stock in an echo of what happened on Wall Street with GameStop Corp. earlier this year.
Doosan Heavy Industries Construction Co. surged 160% from mid-May to a Monday peak, a gain which has sent its market value to the highest level since 2008. It has recovered over 23% since then, after hitting levels that indicated that it was a little overbought.
Such volatility underlines the tussle between South Korea's influential retail investors - many of whom refer to the stock as Doosla', a portmanteau of Tesla Inc. and Doosan - and short sellers. Doosan Heavy, which builds nuclear and coal fired plants, is one of the most shorted stocks since the partial lifting of a ban on shorting in May according to Korea Exchange data.
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A keyword search of short selling produced almost one thousand posts on Tuesday alone in the online forum dedicated to discussing Doosan Heavy shares on Naver, South Korea's most popular internet search site. Most consumer investors - known locally as the 'ants' - expressed their hostility towards unspecified short-sellers and called for solidarity among 'Doosla' shareholders.
'Because retail shareholders are buying Doosan Heavy in such numbers, funds that have short positions are indeed facing challenges, Lee Dong-Heon, an analyst at Daishin Securities Co., said by phone.
According to Korean Exchange data, now the most bought stock of the Kospi has been by retail investors on the Doosan Heavy this June. It was also the most shorted name on Tuesday, according to the data show.
The stock's rapid gains echo other stocks targeted by retail investors including HMM Co., the shipping chain which rose 263% this year through May 27 amid a buying frenzy as well as rising freight costs. Since then it has fallen from these levels by an estimated 11%.
Analysts such as Lee have resisted from issuing target prices or recommendations on Doosan Heavy while its parent Doosan Group begins financial restructuring and asset sales as it prepares to repay debt.
Doosan Heavy is trying to transition from coal-fired power plant construction into renewable energy and other forms of electric energy generation. Once valued at a close to 20 trillion won during its peak in 2007, it saw its market value decline under 5 trillion won for years as overseas nuclear power plant orders dropped while it brought out local coal businesses.
Nevertheless, on Wednesday it had a market cap of about $9.5 billion.
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