Battery ETFs benefit from AI data center-driven ESS demand

LG Energy Solution posts record quarterly sales

Sectors with upward earnings revisions seen outperforming in Q4

An ESS battery container for power grids made by LG Energy Solution [LG Energy Solution]
An ESS battery container for power grids made by LG Energy Solution [LG Energy Solution]

Eight of the top 10 ETFs listed in South Korea by return over the past eight days were secondary battery-related products, as sector bellwether LG Energy Solution posted record quarterly sales on the back of surging energy storage system demand — a sign the industry may be shaking off a prolonged demand slump.

According to Korea Exchange and Koscom CHECK, eight of the 10 best-performing domestically listed ETFs from Oct. 1 through Thursday were secondary battery-related products.

The KODEX 2nd Battery Industry Leverage ETF led the pack with a gain of 19.94 percent, followed by the TIGER 2nd Battery TOP10 Leverage ETF at 18.45 percent.

The SOL All-Solid-State Battery & Silicon Anode ETF rose 13.48 percent to rank third, while the KODEX All-Solid-State Battery ESS TOP2 Plus ETF gained 13.44 percent for fourth place. All-solid-state batteries replace the liquid electrolyte inside a conventional battery with a solid material and are expected to reach commercial production next year.

Rounding out the top 10 were the BNK 2nd Battery Cathode ETF (sixth, up 11.22 percent), the KODEX 2nd Battery Industry ETF (eighth, up 10.68 percent), the SOL 2nd Battery Materials & Components ETF (ninth, up 10.47 percent) and the TIGER 2nd Battery Materials ETF (tenth, up 10.26 percent).

The strong run in secondary battery ETFs is widely attributed to ESS-related earnings gains flowing through to battery companies as AI data center expansion drives demand for large-scale energy storage.

Sector leader LG Energy Solution disclosed Thursday that its consolidated operating profit for the third quarter of this year came in at 756 billion won ($565 million) on a preliminary basis, up 25.7 percent from the same period last year. Quarter-on-quarter, operating profit surged 567.3 percent, with the company achieving a record quarterly high in sales.

The KRX K-AI Secondary Battery Index climbed 10.79 percent this month, the highest gain among Korea Exchange theme indexes — more than double the 4.88 percent rise posted by the KRX AI Semiconductor Index.

Kim Gwi-yeon, a researcher at Daishin Securities, maintained an "overweight" investment opinion on the secondary battery sector, saying order momentum toward year-end would be followed by share price momentum driven by ESS sales growth and improved profitability next year.

Nam Yong-su, head of the ETF division at Korea Investment Management, said the recent gains in secondary battery ETFs reflect rising growth expectations from the link between ESS and AI data centers. "We expect an ESS-led recovery to continue, but as share prices move from growth expectations into an earnings-verification phase, investors will need to confirm ESS supply contracts and mass production capacity," he said.

Meanwhile, Lee Jae-man, head of global investment analysis at Hana Securities, said at a recent investment forum that sectors whose earnings estimates for next year are revised upward in October tend to deliver stronger fourth-quarter returns than those facing downward revisions. An analysis of Kospi sectors from 2023 to 2025 showed that sectors whose following-year earnings estimates were raised during the third-quarter earnings season in October outperformed those with downward revisions on a fourth-quarter share price basis.

Sectors identified as having both high projected earnings growth next year and recent upward revisions to earnings estimates include chemicals, secondary batteries, power equipment and semiconductors. Hana Securities forecast Kospi net profit growth at 30.6 percent in 2027, with chemicals projected at 138.0 percent, secondary batteries at 129.1 percent, power equipment at 36.4 percent and semiconductors at 35.6 percent.


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