[Asia Economy Reporter Kwon Jaehee] Movements in China-related stocks are being observed amid expectations of easing China's zero-COVID policy. Not only cosmetics-related stocks but also duty-free, casino, and travel sectors have generally continued a long-term upward trend, although there was a slight decline recently due to profit-taking sales after the previous trading day. Experts have also predicted that China-related stocks will show strength for the time being.
According to the Korea Exchange on the 8th, Amorepacific closed unchanged at 135,000 KRW the previous day. Since hitting a low of 86,800 KRW on October 28 this year, it has steadily risen, reaching a high of 139,500 KRW on the 5th. It closed lower over the last two trading days, interpreted as a slight decline due to profit-taking sales. Along with Amorepacific, LG Household & Health Care, considered a representative China-related stock, closed at 693,000 KRW, up 0.73% from the previous trading day. LG Household & Health Care also steadily rose from a low of 499,500 KRW on October 28 to a high of 720,000 KRW on the 5th.
Duty-free related stocks such as Hotel Shilla and Shinsegae also rose together. Hotel Shilla recorded this year's lowest point at 60,600 KRW on the 4th of last month and closed at 79,300 KRW the previous day. It had steadily risen over the past seven trading days but closed slightly lower the day before. Shinsegae closed at 230,500 KRW, up 3.36% from the previous trading day.
In addition, travel and casino-related stocks are also strong. Norangpungseon rose for five consecutive trading days, and although it gave up some gains after rising as much as 5.02% the previous day, it closed up 2.71% at 7,570 KRW. Hana Tour and Paradise also rose about 22% and 30%, respectively, compared to this year's lows.
The blank protests, which started as collective resistance against high-intensity quarantine regulations, have spread, prompting Chinese authorities to hasten the easing of quarantine measures. This is because the authorities have recently failed to curb the rapid increase in confirmed cases despite strong zero-COVID policies. Moreover, the prolonged zero-COVID policy has adversely affected the Chinese economy, which is also cited as a reason for the Chinese government’s shift toward easing quarantine policies. In fact, China's retail sales in October turned negative compared to the previous month, highlighting the domestic demand slump.
Lee Jae-sun, a researcher at Hyundai Motor Securities, said, "Due to the domestic demand slump caused by the Chinese authorities' high-intensity quarantine policies, it is becoming increasingly difficult to defend growth," adding, "Discussions on easing China's quarantine measures will act as a positive factor for Korean companies, for which China accounts for 7.5% of overseas demand."
The securities industry expects China reopening-related stocks to remain strong for the time being. In particular, it is believed that the Chinese government is highly likely to abolish the zero-COVID policy around March next year when the National People's Congress (lianghui) is held. It is forecasted that the easing policies will come in the order of PCR regulation relaxation, regional lockdown easing, and relaxation of entry and movement restrictions.
Jeon Jong-gyu, a researcher at Samsung Securities, analyzed, "It is clear that China's quarantine policy has shifted to a 'gradual reopening,'" adding, "The Lunar New Year in January and the lianghui in March next year will be important turning points."
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