[MarketING] China’s Easing of Quarantine Measures: Thought It Was a Breeze

Concerns Grow Over Sharp Increase in COVID-19 Cases After China Eases Quarantine
China-Driven Momentum Remains Valid for Individual Stocks

On the 29th, the KOSPI index opened at 2265.73, down 0.65% (14.72 points) from the previous trading day. Dealers are working in the Hana Bank dealing room in Jung-gu, Seoul. Photo by Jinhyung Kang aymsdream@

[Asia Economy Reporter Song Hwajeong] China's easing of quarantine measures is backfiring in the market. Initially, China's transition to 'With Corona' was expected to alleviate concerns about an economic downturn, but instead, growing worries over the increase in confirmed cases are negatively impacting the stock market.

China's Quarantine Easing Turns from Favorable Wind to Headwind

As of 10:01 AM on the 29th, the KOSPI stood at 2,265.99, down 14.46 points (0.63%) from the previous day. It continued its decline for the second consecutive day, falling below the 2,270 mark during trading. The KOSDAQ dropped 5.72 points (0.83%) to 686.65.

The decline in the New York stock market overnight is also reflected in the domestic market. On the 28th (local time), the Dow Jones Industrial Average closed down 1.10% from the previous trading day at the New York Stock Exchange (NYSE), while the S&P 500 and Nasdaq indices fell 1.20% and 1.35%, respectively, with all three major indices recording losses exceeding 1%. Concerns over a sharp rise in new COVID-19 cases originating from China negatively affected the stock market.

In China, new COVID-19 cases are rapidly increasing alongside the easing of quarantine measures. Although China has not been reporting the number of confirmed cases since the 25th, an internal document recently revealed that daily infections may have reached as high as 37 million. Amid this situation, as quarantine easing is expected to increase overseas travel by Chinese citizens, several countries are tightening entry restrictions on Chinese travelers. India, Japan, Taiwan, and Italy have mandated COVID-19 testing for arrivals from China, while the United States and the Philippines are also reviewing new entry quarantine policies.

Yesterday, analyses suggesting that China's easing of COVID-19 restrictions could stimulate inflation also contributed to the stock market decline.

Han Jiyoung, a researcher at Kiwoom Securities, analyzed, "The consensus was that China's full-scale reopening (resumption of economic activities) would act as a buffer, improving China's demand and potentially limiting the global economy to a mild recession or soft landing. However, the surge in new confirmed cases and deaths after reopening appears to be restricting the normalization of economic activities among Chinese people." She added, "Furthermore, major countries such as the United States and Japan are strengthening entry regulations on Chinese nationals to prevent domestic COVID-19 spread, which is causing a gap between expectations and reality regarding economic and corporate performance changes after reopening."

China-Related Momentum in Individual Stocks Remains Valid

Despite growing concerns over the spread of COVID-19 cases from China, China-related momentum in individual stocks remains effective.

Following the news that the Chinese government has issued licenses (approval for game services in China) for seven Korean games, gaming stocks are collectively rising today.

As of 10 AM, JoyCity rose 20.77%, Netmarble increased 15.98%, Nexon Games climbed 8.7%, Kakao Games went up 7.58%, and NCSoft gained 5.88%.

The Chinese National Press and Publication Administration announced on its website the previous day that it had approved the import of a total of 44 foreign games, including seven Korean games, as of the 10th of this month. The Korean games that received licenses this time include Smilegate's 'Lost Ark' and 'Epic Seven,' Nexon's 'MapleStory M,' Netmarble's 'The Second World: Cross World' and 'A3: Still Alive,' Netmarble subsidiary Kabam's 'Shop Titans,' and Npixel's 'Gran Saga.'

Im Heeseok, a researcher at Mirae Asset Securities, said, "It is encouraging that licenses were issued for titles still performing well globally, and under the condition that publishing is handled by Chinese game companies, additional license issuance is expected to continue. The issuance of foreign game licenses and China's reopening will act as new growth momentum for domestic game companies."

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