'Wuhan Pneumonia' Spreading to the Stock Market

Domestic COVID-19 Case Surge Drives Pharmaceutical Stocks Up
Orient Bio Jumps 29%
Jinwon Life Science, Koryo Pharm Soar to Price Limits

Hotel, Duty-Free, Cosmetics, Travel Stocks
Chinese Consumer Stocks, Previously Soaring, Now Down

[Asia Economy Reporter Oh Ju-yeon] As the number of patients infected with the novel coronavirus, called 'Wuhan pneumonia' in China, increases, the domestic stock market is showing mixed results across different sectors. While Chinese consumer stocks, which had been soaring ahead of the Lunar New Year, have been dampened, pharmaceutical stocks continue to surge daily.

According to the Korea Exchange on the 21st, as of 9:30 a.m., Orient Bio was trading at 406 won, up 29.71% from the previous trading day. Gene therapy and gene vaccine development specialist GeneOne Life Science continued its strong performance, rising 19.33% from the previous day after hitting the daily price limit the day before. Baekkwang Industry, known for producing products recommended by the World Health Organization (WHO) as coronavirus disinfectants, rose 13.55% during the day following its previous day’s limit-up close.

On the KOSDAQ market, Korea Pharmaceutical, which had also hit the daily price limit the day before, rose another 14.15%, and JinMatrix, which holds respiratory disease diagnostic products, surged 19.28%. Mask manufacturer Ogong rose 10.58%.

The Korea Centers for Disease Control and Prevention announced the day before that a Chinese national woman who entered Incheon Airport from Wuhan, China on the 19th was infected with Wuhan pneumonia, raising the infectious disease alert level from 'interest' to 'caution.' On the same day, China reported its fourth death from Wuhan pneumonia.

Some view the spread of Wuhan pneumonia in China as a trend that could trigger concerns about a domestic demand slump in China, similar to the MERS (Middle East Respiratory Syndrome) outbreak. In the domestic stock market, Chinese consumer stocks, which had been strong earlier in the year on hopes of lifting the ban on Korean Wave content (Hallyu ban), took the biggest hit.

AmorePacific’s stock price, which reached a 52-week high of 240,500 won on the 17th, fell 4.86% the previous day and dropped another 2.44% on this day, falling below the 220,000 won level. LG Household & Health Care’s stock also declined from 1,406,000 won at the close on the 17th to 1,378,000 won during the day. Hotel Shilla barely maintained the 100,000 won level after falling 5.07% the previous day and another 1.46% this day. Other stocks such as Shinsegae International (-2.57%), Modetour (-3.42%), and Hana Tour (-2.63%) also declined on this day.

Kim Dae-jun, a researcher at Korea Investment & Securities, analyzed, "In the short term, health care theme stocks were expected to gain reflected benefits, leading related stocks to hit the daily price limit, while Chinese-related consumer stocks such as cosmetics, duty-free, and hotels, which had been strong, showed weakness. This is the result of a consensus that Chinese consumer momentum will likely slow compared to before."

Looking back at the MERS outbreak, the prevailing view is that this trend will not continue long-term and that the market will reverse direction once the infectious disease issue is resolved.

Kim Yong-gu, a researcher at Hana Financial Investment, said, "Unlike past large-scale pathogen outbreaks, this case is clearly a disease that can be treated with antibiotic prescriptions, which is an important point to consider. Although caution regarding this issue may provide an excuse for profit-taking in Chinese inbound tourism and related stocks, the possibility of escalating into a panic phase like during MERS is minimal."