Korea Stocks Hit by Thaad Row Bounce Back as China Tensions EaseBy
SocGen’s basket of equities closes gap with index of peers
Tourism operators, exporters among those affected by dispute
Companies in South Korea that were hit by the economic backlash imposed by China in response to the deployment of the Thaad missile shield have seen their shares climb following the diplomatic thaw between the countries.
A basket of such stocks, which includes some of South Korea’s biggest companies, is narrowing the gap with the Kospi 200 Index after lagging behind the gauge for months.
Societe Generale SA’s Thaad basket was created in April and tracks the stocks of firms exposed to China consumption or tourism. China is South Korea’s largest trading partner, buying about a quarter of the country’s exports, and a major source of tourism income. The basket includes cosmetics, leisure, hotel, retail and auto firms. AmorePacific Corp., Cosmax Inc., Lotte Shopping Co., Hotel Shilla Co., Korean Air Lines Co. and Grand Korea Leisure are among the companies on the list.
China opposed the installation on the Korean peninsula of the U.S anti-missile system, which Seoul insists is for defensive purposes only against Pyongyang, and took steps to punish it economically. The two countries agreed to put aside the dispute and restore bilateral relations at the end of last month.
“A number of Korean companies, including China tourism-related stocks and exporters to China, had been directly or indirectly impacted by China’s retaliatory measures,” said Rajat Agarwal, a strategist at Societe Generale SA. “A resolution should further ease the short-term risk hanging over Korean securities and give a boost to equities, particularly the China-exposed sectors like auto and auto ancillary and consumer stocks.”
— With assistance by Heejin Kim