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COVID-19 treatment

Korea’s reopening stocks jump on easing Omicron woes

Analysts recommend investing in travel, entertainment, hotel sectors for long term

By Dec 03, 2021 (Gmt+09:00)

South Korea’s Kospi closes up 0.78% on Dec. 3 with a surge in reopening stocks
South Korea’s Kospi closes up 0.78% on Dec. 3 with a surge in reopening stocks

South Korea’s reopening stocks surged on Dec. 3 as US President Joe Biden’s plans to curb the Omicron variant of COVID-19 exclude lockdowns, alleviating concerns over the variant’s impact.

Market experts recommended buying stocks in industries such as entertainment and travel sectors benefitting from the economic reopening, expecting their business conditions will recover in the third quarter of 2022 at the latest.

In the Seoul stock markets, SM Entertainment Co. surged 11.32% to close at 71,800 won ($60.77), while JYP Entertainment Inc. and YG Entertainment Inc. soared 6.43% and 5.29%, respectively. Among the travel sector, Yellow Balloon Tour Co. jumped 4.85% and HanaTour Service Inc. gained 3.84%. Kangwon Land Inc. grew 4.57%. Hotel Shilla and Korean Air Lines Co. rose 3.27% and 2.52%, respectively.

BIDEN ALLEVIATES WORRIES

That came after Biden on Dec. 2 announced an action plan to battle COVID-19 this winter.

“It doesn’t include shutdowns or lockdowns but widespread vaccinations and boosters and testing and a lot more,” he said.
US President Joe Biden
US President Joe Biden

Investors welcomed the strategy to exclude shutdowns even as the plan included tougher travel restrictions since it indicated the Omicron variant is more contagious but less severe.

In addition, GlaxoSmithKline said its antibody-based COVID-19 therapy co-developed with US partner Vir is effective against the Omicron.

Those positive factors boosted reopening shares in the US. Delta Air Lines surged 9.28%, while Carnival Corp., a tour operator company, and Booking.com jumped 9.22% and 5.08%, respectively.

JPMorgan’s chief global strategist Marko Kolanovic said the Omicron variant provides an opportunity to buy cyclicals, commodities and reopening themes on dips, adding the virus could become seasonal flu.

LONG-TERM INVESTMENT

South Korea’s reopening stocks failed to meet expectations that they will benefit from the government plans to gradually phase out pandemic restrictions from November due to the Omicron variant.

“Those stocks fell because China, the largest market for South Korea’s travel sector, is aiming for ‘zero Covid,'” said Jeong Myung-ji, head of investment and research at Samsung Securities.

Analysts in South Korea recommended buying the reopening shares on dips for long-term investments, given expectations that those sectors are likely to see improvement in business conditions in the second quarter, or the third of next year, at the latest.

Authorities around the world are unlikely to close their borders since the Omicron has not resulted in critical illness so far, they said.

“China is also expected to ease mobility restrictions ahead of key ‘festivals’ such as the 2022 Asian Games in Hangzhou in June,” Samsung’s Jeong said, expecting further rises in the reopening shares.

Yuanta Securities Korea recommended investing in hotel, leisure and media entertainment sectors. The brokerage house’s top picks were Hotel Shilla and YG Entertainment.

“Once businesses of the reopening-related sectors start recovering, their shares are expected to quickly rebound regardless of their valuations,” said Yuanta’s chief strategist Kim Seung-hyun said. “Easing restrictions of overseas travels will improve earnings of duty-free, travel and entertainment sectors.”

Write to Sung-Mi Shim at smshim@hankyung.com

Jongwoo Cheon edited this article.
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