Korea reopening stocks rally as govt. eases COVID-19 restrictions

South Korea’s reopening stocks jumped on Friday as the government eases COVID-19-curbing restrictions and as the number of the Omicron variant infections tumbles in other countries where the pandemic has peaked.

Local travel shares soared among sectors benefitting from the economic reopening and demand recovery. Modetour Network Inc., rallied 8.31% to 22,800 won ($18.5) and Yellow Balloon Tour Co. surged 7.97%, far outperforming the 0.3% gain of the country’s junior Kosdaq. Hanatour Service Inc. also surged 5.29%, defying the 0.71% loss of the main Kospi.

Casino-related Paradise Co. and Lotte Tour Development Co. ended up 6.5% and 5.68%, respectively, while Grand Korea Leisure Co. advanced 7.09%. In the airline sector, T’Way Air Co. rose 8.36%, while its low-cost competitors Jeju Air Co. and Jin Air jumped 6.36% and 4.46%, respectively.

That came as the government said fully vaccinated South Koreans and foreign visitors from overseas do not need to self-quarantine from March 21, except for those from Pakistan, Uzbekistan, Ukraine and Myanmar. Currently, all people who enter South Korea must self-quarantine for seven days regardless of their vaccination status.

“Vague expectations are realized in actual policies,” said Growth Hill Asset Management CEO Kim Tae-hong.

Investor sentiment improved on the declining number of Omicron cases in developed countries such as the US where the daily average COVID-19 cases in the seven days to March 9 fell to 35,796 from a peak of 806,795 reported on Jan. 14, according to the New York Times.

OIL BRAKES

Analysts, however, recommended paying attention to oil prices since its jump is expected to hurt some companies such as airlines, travel agencies and duty-free shop operators. Higher crude prices usually ramp up flight fares and increase total trip costs, dampening demand for travel agency services and duty-free items.

“Travel stocks are likely to be volatile as oil prices are affected by the war in Ukraine,” said chief strategist Kim Seung-hyun at Yuanta Securities Korea.

Oil prices earlier this month spiked to a 14-year peak with the global benchmark Brent at $139.13 a barrel.

That could undermine the fundamentals of airlines, travel agencies and duty-free shop operators, the financial structures of which remain fragile, market experts said.

“It is risky for conservative investors to chase stocks in the sectors,” said Growth Hill’s Kim.

Shares of those industries are expected to outperform the overall market, given pent-up demand for international travel that will explode once countries worldwide open up their borders.

“The reopening stocks will rise more once the recovery of travel reservations is confirmed,” said a source at a brokerage house.

DOMESTIC-ORIENTED SECTORS

Investments in domestic-oriented companies will be safer bets, analysts said. Beverage makers such as HiteJinro Co. and Lotte Chilsung Beverage were their favorites as the government extended a business curfew for restaurants and bars to 11 pm from March 5, raising sales of beer and soju, a distilled alcoholic beverage. Soju makers’ profitability improved on price hikes.

Kangwon Land Inc. was also among their choices as it operates the country’s only casino for locals. The eased restrictions are expected to attract more domestic gamblers. In the duty-free shop sector, Shinsegae Inc. is expected to be safer than others since the retail giant operates both duty-free shops and department stores.

The outlook for the entertainment sector’s stocks is also bright as K-pop stars are set to resume offline concerts.

BTS, the world’s top boy band, on Thursday returned to the stage for three shows in Seoul, while Twice, a nine-member girl band, started a concert tour in North America last month. Red Velvet is scheduled to perform on March 19 in Seoul.

Write to Eui-Myung Park at uimyung@hankyung.com
Jongwoo Cheon edited this article.