Cosmetics and Duty-Free Stocks Surge on China's Eased Quarantine Measures... "Positive Momentum Expected to Continue"

Korea Investment & Securities Report

[Image source=Yonhap News]

[Asia Economy Reporter Myunghwan Lee] As China significantly relaxes its quarantine policies and effectively abandons its 'Zero COVID' policy, securities firms predict that the stock prices of cosmetics and duty-free related companies listed on the domestic stock market will continue to rise.

On the 10th, Korea Investment & Securities analyzed, "With the Chinese government's relaxation of COVID-19 related quarantine policies, the stock performance of duty-free and cosmetics companies with a high sales proportion to China has been favorable."

Earlier, on the 7th, the Chinese State Council announced 10 additional measures to significantly ease quarantine. These 10 measures include abolishing routine full PCR testing, allowing home treatment, and removing the PCR negative certificate requirement for travel to other regions. This represents a major relaxation of the key quarantine policies China has implemented over the past three years to maintain Zero COVID.

As Chinese authorities show signs of easing regulations, domestic cosmetics and duty-free related stocks have shown an upward trend. According to Korea Investment & Securities, from the emergency briefing on COVID-19 quarantine by the Chinese State Council held on the 29th of last month until the 6th, Amorepacific rose 8.4%. During the same period, LG Household & Health Care increased by 11.5%, and Hotel Shilla jumped 14.1%. Compared to the KOSPI's 0.6% decline during this period, the rise is notable.

Korea Investment & Securities analyzed that as China pursued the Zero COVID policy, the domestic duty-free and cosmetics markets experienced a decline in sales from daigou (Chinese personal shoppers) and a decrease in sales from local Chinese subsidiaries due to weakened Chinese consumption. Additionally, the depreciation of the yuan and China's quarantine policies for overseas arrivals further reduced sales in the domestic duty-free industry. Sales in the duty-free industry in the third quarter of this year remained at 63% of the level in the third quarter of 2019, before the COVID-19 pandemic.

There is an assessment that even the expectation of such quarantine relaxation could be a positive factor for related industries. Kim Myung-joo, a researcher at Korea Investment & Securities, said, "Expectations for further regulatory easing by the Chinese government remain high," adding, "In the short term, duty-free and cosmetics companies with a high sales proportion to China will continue to show favorable stock performance."

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