Leisure, airline stocks to shine as Japan sets to ease travel curbs

South Korea’s travel and airline stocks are expected to shine as Japan plans to ease its border controls in June. Korea’s Shinhan Investment Corp. said some stocks related to low-cost carriers (LCCs), casinos and travel agencies will benefit from the updating of Japan’s entry policy. 

In his speech at the financial district City of London on Thursday, Prime Minister of Japan Fumio Kishida said he will loosen Japan’s border controls to the same levels as other Group of Seven (G7) nations in June.

Japan started banning nonresident foreigners’ entry in March 2020 and has adjusted its level of restrictions in line with the severity of COVID-19. In March of this year, it opened the border for foreign businesspeople, employees and students but not tourists.

Japan’s new entry policy will boost Korean leisure and airline stocks, market watchers say. As of 2019, Japan was Korean tourists’ second most popular destination, after China.

Air routes between Korea and Japan accounted for 18.8% of Korean airlines’ international routes after the “No Japanese” campaign in 2019, which boycotted Japanese goods and travel in response to Japan’s curbs on high-tech material exports to Korea. In 2019 before the boycott campaign, the routes between the two countries reached 30%.    

Shinhan Investment on Friday forecasted Korean LCC, casino and travel agency stocks to rise thanks to the upcoming changes in Japan’s entry policy. Particularly, Korean LCCs will benefit from the changes as 55% of their sales comes from the routes to and from Japan. Of the LCCs, Air Busan Co. has the largest sales to and from Japan, and T’way Air Co., Jin Air Co. and Jeju Air Co. follow, Shinhan Investment said.   

“Expectations on resuming the air routes between the two countries are growing -- however, investors should wait for the incoming Korean government’s official announcement on the details,” said Ji In-hae, a senior research analyst at Shinhan Investment. “Also, they should be prepared to bet on some LCC stocks,” Ji added. Air Busan’s stock has fallen 0.5% since early this year, while T’way, Jin Air and Jeju Air have respectively risen more than 8%, 3% and 18%.  

Ji also said Paradise Co., known for Paradise Hotel & Resort, and travel agency Hana Tour Service Inc. will be boosted. Paradise and Japanese company Sega Sammy Holdings Inc. have jointly developed Paradise City in Incheon, a complex including a luxurious hotel, resort, casino and convention center.

“As of 2019, Japanese VIPs’ drops, or money exchanged for chips, at Paradise Casino were 35% higher than those at other competitor casinos. Including mass players’ drops, Japanese guests’ drops at Paradise were 40% higher than in other casinos. Japanese visitors’ expenses fully covered the loss of Chinese tourists,” said Ji. Paradise's stock has jumped more than 5% since early this year.

In addition, Hana Tour has long developed its travel services in Japan and has greater competitiveness than other travel agencies, Ji said. Japan makes up 25% of its Korean customers’ destinations, compared with its competitor Mode Tour’s 11%.

Write to Sul-Gi Lee at surugi@hankyung.com
Jihyun Kim edited this article.