Korea Stocks Shattered as Virus Hit Extends From Tourism to Tech

(Bloomberg) -- South Korean stocks bore the brunt of Asian stock declines tied to the new coronavirus Tuesday as more markets opened after holidays and concerns spread from short-term consumerism to longer-term growth.

The benchmark Kospi plunged as much as 3.6%, set for the biggest decline since October 2018. Companies that had benefited from Chinese tourism took bigger hits, with cosmetics maker Amorepacific Corp., travel agency Hana Tour Service Inc. and Hotel Shilla Co. all tumbling more than 10%. The moves mirrored drops in consumer and travel names in Japan and Thailand on Monday.

Market reaction to the virus may stall the nascent recovery in Korea’s tourism shares. After languishing for much of last year on strained relations with China, the sector had started to recover in January on optimism over improving bilateral relations.

“I guess it won’t be easy for tourism stocks to rebound for a while, as there have been concerns over the earnings outlook for the sector,” said Yoon Joonwon, a fund manager at HDC Asset Management in Seoul. “However, I might add some cosmetics names if they get oversold and appear to hit a bottom.”

Chinese tourists accounted for 35% of total foreign travelers to South Korea in November 2019, according to NH Investment & Securities. The economic impact could be much broader given the importance of China, the nation’s largest trading partner, to the export-driven South Korean economy. Korea’s GDP took a hit in early 2003 from the SARS epidemic.

Korea’s tech sector didn’t escape the damage Tuesday, as chipmaker Samsung Electronics Co. dropped over 3%. U.S. peers slid overnight, with tech giants including Apple Inc., amid fears that the disease could crimp production in Wuhan, a major memory design and manufacturing site in China.

Here is a look at other notable movers in Asia:

• In Japan, electronics and machinery makers were the biggest drags on the Topix index. The virus’s spread could damp enthusiasm over earnings which are set to kick into high gear Wednesday with reports from major tech players including Fanuc Corp. and Canon Inc.

“We expect the impact of the novel coronavirus to only be reported in earnest after the end of the Chinese New Year, in the shape of factory halts and product supply suspensions,” Citi analyst Kota Ezawa wrote in a note.

• Asian steelmakers including Posco, Nippon Steel Corp. and BlueScope Steel Ltd. tumbled. Analysts at Nomura and SMBC Nikko cautioned that steel prices may decline after this week’s holiday on slowdowns in construction, manufacturing and other economic activity on the illness outbreak.
• BHP Group Ltd., suffered its worst drop since August. Royal Bank of Canada noted that China now consumes more iron ore and copper than at the time of the SARS epidemic.
• Healthcare-related stocks remained outperformers as China continued to grapple with the spread of the deadly virus. Gainers included Malaysian glove manufacturer Top Glove Corporation Bhd, Samsung Biologics Co., India’s Sun Pharmaceutical Industries Ltd. and Japanese biopharma name Takara Bio Inc.

To contact the reporters on this story: Heejin Kim in Seoul at hkim579@bloomberg.net;Kurt Schussler in Tokyo at kschussler1@bloomberg.net

To contact the editors responsible for this story: Lianting Tu at ltu4@bloomberg.net, Kurt Schussler

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