Drug, travel and cosmetics stocks fluctuate as Covid cases in China rise

Empty pharmacy shelves in Beijing, China [Photo by Yonhap]

Stock prices of South Korean companies in the pharmaceutical and cosmetics industries fell on news that the number of Covid cases are rising in China, while those of travel firms rebounded.

On Jan. 3, shares of Dongsung Pharmaceutical Co. closed the day down 1.49 percent after soaring 23 percent earlier in the day. Shinil Pharmaceutical Co. saw its shares soar 16.18 percent during the day but closed 1.51 percent lower.

The big price fluctuations came as rumors spread through Chinese social media that a new variant of Covid-19, XBB, in China causes abdominal pain and diarrhea. After the postings, there was a surge in demand for antidiarrhea medicines and companies that make the drugs saw their shares soar. However, experts reassured the public, saying any virus, not just Covid-19, can cause diarrhea.

Other pharmaceutical shares fluctuated widely due to the spread of Covid-19 in China. Shares of Kyung Nam Pharmaceutical Co. soared 46.5 percent for two trading days to Jan. 2 following the news on China’s shortage of cold medicines but closed the day 9.34 percent lower. Shares of Yungjin Pharmaceutical Co. also fell 8.06 percent.

[Photo by MK DB]

Stock prices soared on the news that Chinese merchants, who buy tax-free goods in South Korea to sell them back in China, also known as Daigong, are stocking up on large quantities of cold medicines in South Korea. Stocks have risen excessively during a short period for these theme stocks.

Cosmetics stocks, which had raised expectations following the lifting of China’s Covid lockdown, also fell. Shares of LG Household & Health Care Co. dropped 1.67 percent on the day. Amorepacific Corp. also declined 1.46 percent.

Travel-related stocks, however, rebounded after falling on news the government will tighten entry rules on Chinese visitors. Shares of Lotte Tour Development Co. once fell by almost 2.58 percent but immediately recovered and ended up rising 1.85 percent.

Experts say travelers from China isn’t a major factor in travel companies’ earnings. Rather some analysts say investors should see this short-term decline an opportunity to buy stocks at low prices.

“Even last year, when Chinese tourists had negligible impact, sales and stock prices of domestic casinos rebounded,” Na Seung-du, a researcher at SK Securities Co., said. “Regulations of Chinese visitors due to the spread of a new COVID-19 variant is not likely to affect this upward trend.”

Domestic low-cost carriers also rebounded immediately. Shares of T’way Air Co., which once plunged 4.51 percent during the day, turned upward and closed 4.1 percent higher. Shares of JejuAir Co. and Jin Air Co. also went up by 0.68 percent and 3.12 percent, respectively.