[Weekend Money] With Chinese New Year Approaching, Will K-Beauty Stocks Warm Up?

Consumer Stocks with Strong Export Performance in Focus Amid KOSDAQ Rally
K-beauty Sectors Such as Medical Devices and Cosmetics Expected to Benefit from Lunar New Year Momentum

With the KOSDAQ surpassing the "Chunsdaq" milestone and climbing past the 1,100 mark, attention is turning to consumer stocks such as K-beauty. This is because export performance remains robust, and with the Chinese New Year (Lunar New Year) approaching, K-beauty and other consumer stocks are expected to benefit.

Yonhap News Agency

The KOSDAQ's upward momentum is accelerating. After reclaiming the 1,000 level on the 26th for the first time in over four years, it continued to rise daily, breaking through the 1,100 mark for the first time in 25 years. However, despite this strong performance, some investors may hesitate to enter the market due to concerns about earnings and valuations. Kang Jinhyuk, a researcher at Shinhan Investment Corp., stated, "The biggest concern for investors hesitant about the KOSDAQ is doubts about earnings or valuations. In particular, a major challenge is whether to follow the short-term surges in secondary battery and robotics stocks, which are rising more on expectations than actual profits, or to seek alternatives."

As an alternative, Kang suggested K-beauty stocks, including medical devices and cosmetics. He explained, "Although these consumer stocks are somewhat outside the current KOSDAQ frenzy, those with visible export and sales data are worth noting as alternatives. However, since inflows are concentrated in the KOSDAQ 150, small- and mid-cap stocks may be left out. Also, despite the recent weakness in the dollar, the average exchange rate has remained high, making export-oriented industries more favorable than purely domestic ones. Therefore, we are focusing on K-beauty sectors such as medical devices and cosmetics, which benefit from passive inflows into the KOSDAQ 150 and demonstrate strong exports."

In particular, with the February Spring Festival holiday approaching, the increase in foreign visitors to Korea is expected to highlight the momentum of K-beauty stocks. Kang added, "Expectations for a rise in foreign visitors to Korea ahead of the February Spring Festival holiday will have a positive impact on consumer stocks overall. However, there will inevitably be differences in momentum by theme, so selective investment is necessary." He projected the momentum strength in the following order: medical devices > cosmetics > travel and leisure > food products.

Medical device stocks, which gave back most of their gains from the first half of last year during a long and deep correction in the second half, have been rebounding sharply since the end of January this year. Kang analyzed, "The expiration of the value-added tax refund system for cosmetic surgery for foreigners last year is a risk, but the absolute number of inbound tourists continues to increase. It is now necessary to assess, based on data, how sensitive demand will be to changes in foreigner-related policies."

Similarly, cosmetics stocks have recently broken through resistance with strong gains over the past week, ending the prolonged downward trend that persisted since last year. Kang commented, "The influx of Chinese tourists during the Spring Festival holiday can satisfy both the narrative and the numbers, so a trend reversal is anticipated."