One of the world’s hottest stocks is tumbling in S. Korea

SEOUL: Celltrion Inc, the little-known South Korean biotech company that surged into the ranks of the world’s most-traded stocks at the start of 2018, may finally be coming down to Earth.

After climbing 185% over the past year on volume that topped that of Tesla Inc and Citigroup Inc at one point this month, Celltrion abruptly reversed course last week. By yesterday’s close, it was down 20% from a Jan 15 peak, buffeted by disappointing fourth-quarter earnings and a research report from Deutsche Bank AG that criticised the company’s accounting.

If the Celltrion skeptics are right, the stock could have a lot further to drop. Several institutional money managers in Seoul have called the past year’s rally unjustified, a product of excessive speculation among Korea’s mom-and-pop investors.

Even after its slump, the shares are valued at about 100 times earnings, versus 13 for the benchmark Kospi index. Deutsche Bank, which took issue with the way Celltrion capitalized its research spending in a Jan 18 note, said the stock could fall 70%.

“I see housewives are talking about Celltrion – which is a clear signal of bubble in a stock,” said Jung Sung-Han, senior fund manager at Shinhan BNP Paribas Asset Management Co in Seoul.

A Celltrion representative declined to comment on the recent stock moves, but the company refuted the Deustche Bank note, saying it was “distorted analysis” to compare a biosimilar makers’ accounting with that of global pharmaceutical companies. — Bloomberg