Expectations for the Lifting of Hanhanryeong... Chinese Stocks Swell Greatly

[Asia Economy Reporter Koh Hyung-kwang] As expectations grow for the lifting of the Chinese economic retaliation measure known as the Hanhanryeong (Korean Wave ban), related stocks are showing signs of revival after a long time. Group tours by Chinese tourists, which had stopped following the deployment of THAAD (Terminal High Altitude Area Defense) in the second half of 2016, have recently increased again, and with Chinese President Xi Jinping's visit to Korea being discussed, the possibility of a complete lifting of the Hanhanryeong is also being raised.

According to the Korea Exchange on the 14th, JYP Entertainment's stock price surged 10.8% the previous day, closing the session with the highest trading volume in the past year. YG Entertainment, whose stock price had significantly dropped due to various adverse factors last year, also rose 9.2%, and SM Entertainment increased by 8.9%.

The simultaneous rise in entertainment stocks was driven by the news that a K-pop idol concert in China is being planned for the first time since the Hanhanryeong was imposed in 2016. Industry insiders expect that if the Hanhanryeong is lifted following this concert, entertainment stocks will regain investors' trust.

Cosmetics-related sectors also showed a sharp rise. Hankook Cosmetics and Tony Moly rose 23.4% and 13.8%, respectively. Hankook Kolmar (8.6%), AmorePacific (5.2%), and LG Household & Health Care (4.5%) also saw significant gains. These results reflect expectations that sales growth will significantly accelerate if the Hanhanryeong is lifted.

Hotel Shilla, which operates duty-free shops in Incheon Airport as well as downtown Seoul and Jeju, closed trading at 106,500 KRW, up 3.9% the previous day. Shinsegae rose 3.6%, and Hyundai Department Store also ended trading up 2.6%. These stocks saw renewed buying interest amid expectations of improved earnings following the lifting of the Hanhanryeong.

However, concerns have been raised that the increase in downtown duty-free shops from six in 2016 before the Hanhanryeong to 13 now?more than double?has intensified competition, which may limit earnings improvements, resulting in a relatively smaller rise compared to other sectors.

There is also a view that it is necessary to observe further whether the upward trend of China-related stocks will continue. A securities industry official pointed out, "There is a possibility that President Xi's visit may be canceled, and depending on the situation on the Korean Peninsula, relations between Korea and China could freeze again, so risks must be considered. It is necessary to monitor the trends in Chinese tourist numbers and changes in Korea-China relations while checking whether companies' earnings improve."

This content was produced with the assistance of AI translation services.