Cosmetics and Casino Stocks Plunge Amid Wuhan Pneumonia Spread... Vaccine-Related Stocks Benefit
[Asia Economy Reporter Eunmo Koo] During the Lunar New Year holiday period, as the novel coronavirus infection (Wuhan pneumonia) spread in China, the stock prices of related sectors showed mixed results. Representative Chinese consumer stocks such as duty-free goods and cosmetics plummeted, while vaccine and diagnostic product-related stocks emerged as beneficiaries and surged sharply.
According to the Korea Exchange on the 28th, as of 10 a.m., cosmetics, duty-free, casino, and travel stocks fell sharply. AmorePacific, which had surpassed the 240,000 KRW mark due to improved earnings, dropped 8.00% from the previous trading day to 195,500 KRW, while Korea Cosmetics (-10.58%), Tony Moly (-10.98%), and Able C&C (-11.37%) also plunged. Duty-free store stocks such as Hotel Shilla and Shinsegae International also fell 9.59% and 11.41%, respectively, compared to the previous trading day.
Casino stocks also declined together, with Paradise and GKL falling 10.50% and 10.48%, respectively, from the previous trading day. Travel and airline stocks also plummeted. Hanatour fell 7.64% to 45,350 KRW, Modetour dropped 7.72% to 14,950 KRW, and Korean Air and Air Busan fell 5.91% and 6.65%, respectively.
Fear of the novel coronavirus is expanding day by day, with confirmed cases and deaths reaching 2,744 and 80, respectively, as of the 27th. Concerns are also being raised that Chinese-related consumer stocks, which are undergoing significant adjustments due to this situation, may fall out of favor as leading stocks in the future. Mi-jin Cho, a researcher at NH Investment & Securities, said, "Group tours within China have been suspended since the 24th, and all overseas group tour services have been suspended since the 27th," adding, "Investment sentiment for related consumer goods that have a large sales proportion generated locally in China or are heavily influenced by Chinese tourists is inevitably shrinking."
However, it is pointed out that excessive concerns need to be cautioned against. Infectious diseases can be a short-term factor worsening investment sentiment but are not factors that determine mid- to long-term directions. Researcher Cho said, "Looking at past cases of SARS (Severe Acute Respiratory Syndrome) and MERS (Middle East Respiratory Syndrome), the actual impact of the disease lasted about six months, with a decrease in Chinese inbound tourism occurring over three months, and stock price adjustments of related companies concentrated over 2 to 4 weeks," adding, "Stock prices are expected to recover quickly once the situation is confirmed to be easing."
There is also an analysis that if Chinese President Xi Jinping’s visit to Korea and the recovery of relations with China become visible, investment sentiment and stock prices could rebound to levels above those before the Wuhan pneumonia outbreak. Hyung-ryul Kim, head of the Kyobo Securities Research Center, said, "If mid- to long-term upward factors such as yuan appreciation and expectations for the lifting of the Hanhanryeong (Korean Wave ban) remain, the period when Chinese consumer stocks look attractive could come from the time the infectious disease situation eases."
On the other hand, vaccine-related stocks are benefiting. JinMatrix, which produces diagnostic products for pneumonia pathogens, was trading at 4,130 KRW as of 10 a.m., up 14.70% (530 KRW) from the previous trading day, and Korea Pharmaceutical, a cough medicine company, also recorded double-digit gains of 10.80%. Mask manufacturers Ogong (29.89%) and Monalisa (25.68%) also showed strong performance.
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