Late October 'With Corona'... Travel, Aviation, and Casino Stocks to Watch

KOSPI Returns Negative This Month
Beneficiary Sectors Turn to Gains

[Asia Economy Reporter Park Ji-hwan] As the possibility of introducing ‘With Corona,’ a phased return to normal life, arises as early as the end of October in South Korea, attention is focusing on the stocks expected to benefit. The securities industry has issued positive forecasts for sectors such as travel, airlines, and casinos, which have been severely impacted by COVID-19.

According to the Korea Exchange on the 29th, since the beginning of this month, airline and travel stocks such as Korean Air, Asiana Airlines, Modetour, and Hanatour surged by 7.7%, 13.9%, 11.5%, and 15.8%, respectively. Casino stocks including Lotte Tour Development (12.2%), Kangwon Land (2.5%), and Paradise (2.6%) also rose together. This contrasts with the KOSPI’s -3.2% return during the same period. While the domestic stock market showed sluggish trends due to the imminent tapering (asset purchase reduction) by the U.S. Federal Reserve, concerns over the bankruptcy of China’s Evergrande Group, and a slowdown in corporate earnings outlooks, the introduction of With Corona appears to have been gradually reflected in market sentiment. The government has indicated the transition to With Corona will occur around late October to early November, when the COVID-19 vaccination completion rate reaches 70% of the population.

In the securities industry, casinos are considered the sector that will benefit the most from the transition to With Corona. Nam-soo Lee, a researcher at Kiwoom Securities, stated, "In the With Corona phase, the casino sector is expected to recover earnings ahead of the travel sector, considering the domestic travelers’ demand for hotel vacations and the high recovery resilience when VIPs from China and Japan enter the country."

The airline industry is also experiencing high expectations for earnings improvement, with recent increases in cargo freight rates and anticipated growth in overseas travel demand. Seung-jin Shin, a researcher at Samsung Securities, said, "Korean Air is expected to see strong air cargo demand due to prolonged shipping logistics congestion, and with the easing of the COVID-19 situation, an improvement in the passenger segment’s profitability is also anticipated."

The securities industry is also paying attention to the rapid earnings recovery in the travel sector ahead of the With Corona implementation. Over the past two years under the influence of COVID-19, significant cost reductions have been achieved through business and workforce restructuring, and it is analyzed that the unprecedented pent-up demand for overseas travel, which could not be fulfilled until now, will continue for at least the next two to three years. Ki-hoon Lee, a researcher at Hana Financial Investment, said, "The expectation for the resumption of unprecedented pent-up travel demand will benefit only the companies that survived the selection process," adding, "As the pain prolongs, earnings estimates at the time of travel resumption will be revised upward, so a buying strategy during corrections will be maintained from a mid- to long-term perspective."

Additionally, entertainment stocks such as HYBE, YG, and JYP are expected to benefit from the implementation of With Corona policies not only domestically but also internationally. This is because the increase in offline performances by K-pop idol groups both at home and abroad is expected to improve earnings.