Apparel Stocks Enduring 'Political Risk' Aim for Rebound with China Stimulus and K-Culture

KOSPI Textile and Apparel Index Rises
Expecting Benefits from China's Stimulus to Boost Domestic Demand
"K-Entertainment, Beauty, Ramen... Next Is K-Fashion's Turn"

In a market shaken by political uncertainty, the stock performance of the clothing sector remains robust. Securities firms recently analyzed that domestic clothing companies could benefit as the Chinese leadership expressed a strong commitment to economic stimulus through active fiscal and monetary policies. Furthermore, they evaluated that K-fashion might lead K-culture, which is captivating global consumers.

According to the Korea Exchange on the 12th, among the KOSPI sector indices, the textile and apparel index recorded the best returns from the 4th, when President Yoon Seok-yeol's emergency decree was lifted, until the day before. During this period, the KOSPI fell by 2.30%, but the textile and apparel index rose by 2.39%. This index consists of major domestic clothing brands and original equipment manufacturing (OEM) companies such as F&F, Hansae Co., Handsome, and JS Corporation.

The strength of the textile and apparel index is interpreted as being influenced by the Chinese government's determination to boost domestic demand. On the 9th, the Chinese Communist Party revised its monetary policy stance from 'moderate' to 'appropriately relaxed' and its fiscal policy from 'active' to 'more active' through a Politburo meeting, signaling a comprehensive effort to revive domestic consumption.

As a result, it is analyzed that domestic clothing companies strengthening their presence in China could benefit. Hyunjin Park, a researcher at Shinhan Investment Corp., said, "With China's commitment to economic stimulus confirmed, the apparel sector is identified as a representative industry benefiting from the Chinese economy for the time being. A trading buy strategy may be possible." He added, "Brands expanding their business in China, such as F&F and Brand X Corporation, have been maintaining valuations at historical lows due to sluggish growth caused by weak domestic demand in China. Now, with expectations of China's economic stimulus, stock price volatility is expected to increase."

Moreover, attention is focused on whether the global popularity of 'K-culture'?including K-entertainment, beauty, and food and beverages?can extend into the fashion sector. Junghyun Yoo, a researcher at Daishin Securities, noted, "Similar to Korean cosmetics, which have solidified their position by appealing greatly to global consumers, the fashion sector is beginning to show a phenomenon of thriving with the love of consumers worldwide." He pointed out, "For example, according to a survey by Japan's Rakuten Group, among Japanese teenagers and people in their twenties, the popularity of Korea surpasses that of all traditional fashion powerhouses combined, including the United States, France, Italy, and the United Kingdom."

In particular, Yoo explained that it is positive that K-fashion is expanding its scope beyond the narrow domestic market by leveraging its own brands. He said, "While overseas expansion in the 2010s was centered on China, which indiscriminately absorbed foreign mid-to-low-priced brands, now there is a growing appreciation for purely Korean brands planned by domestic companies." He added, "Word of mouth is spreading among foreign consumers visiting Korea. As this is the stage of actively entering the global market, the high growth potential of Korean brands is expected to continue for the time being."