Hotels and Cosmetics Stocks Smile Brightly as Chinese Tourists Return

Hotel, Casino, and Cosmetics Stocks Rise Over 10% Compared to Last Month
Significant Boost Expected from Duty-Free Shops' Performance Recovery

Stocks related to hotels, cosmetics, and casinos surged sharply. This is interpreted as being driven by expectations of benefits from the resumption of group tours from China.

According to the financial investment industry on the 1st, Hotel Shilla, a duty-free shop-related stock, closed at 88,200 KRW on the 31st. It rose 17.13% compared to the previous month. During the same period, casino stocks Paradise and GKL increased by 17.34% and 17.00%, respectively. Additionally, cosmetics-related stocks Amorepacific and Cosmax showed gains of 18.81% and 49.61%, respectively.

This upward trend is due to expectations of an increase in Chinese group tourists. On the 10th, the Chinese Ministry of Culture and Tourism included South Korea among the countries allowed for group tours by its citizens. This is a sudden approval after 6 years and 5 months.

In particular, this approval is expected to accelerate the recovery of Chinese tourists. Last month, about 1,032,000 foreign tourists visited South Korea, with Chinese tourists numbering 225,000, the largest group. However, compared to the same month in 2019, this is only 46.2% of that level.

According to statistics from the Korea Tourism Organization, the number of tourists entering South Korea from China reached 8,067,000 in 2016. Although the number decreased due to the impact of the Terminal High Altitude Area Defense (THAAD) system, it was 6,023,021 in 2019, before the COVID-19 pandemic.

Especially this year, with the influx of Chinese tourists, significant economic effects are also expected. According to the Bank of Korea’s report titled "Estimation of Economic Effects from the Resumption of Chinese Group Tours," the resumption of Chinese group tours is expected to increase South Korea’s gross domestic product (GDP) growth rate by 0.06 percentage points.

The securities industry also forecasted that the increase in Chinese tourist inflow would bring positive effects. Hyunjin Park, a researcher at Shinhan Investment Corp., explained, "Duty-free sales are expected to recover, and as the sales proportion from non-Chinese markets increases, the performance of cosmetics companies is expected to improve. Although the pace of recovery may be slow, the direction toward recovery is being established."

In particular, the recovery of duty-free shops’ performance is expected to be the greatest. Hyunjung Seo, a researcher at Hana Securities, said, "Due to the nature of the business, duty-free shops will benefit the most from the operating leverage effect resulting from the recovery of Chinese inbound tourism. From a broader perspective, duty-free shops can expect not only performance improvement but also valuation increases."

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