Market Analysts See A Big Opportunity For The Country’s Cosmetics Companies As South Korea Regains Their Dynamic Tourism
Following the Middle East Respiratory Syndrome (MERS) outbreak in South Korea earlier this year, the country is now gaining back their tourism and consumer stocks, which analysts deem an opportunity to choose smart deals.
According to CNBC on Monday, market watchers see a big advantage for South Korea's cosmetic companies, specifically LG Household & Healthcare (LG H&H) and AmorePacific Group, which are the top choices of Chinese tourists. Both cosmetics companies' stocks have dropped by 6.8 and 14.3 percent respectively due to the outbreak on May 20.
"Concern over the recovery in Chinese inbound tourist traffic and Korean companies' local sales in China seem excessive," said Cara Song of Nomura. "There has been a strong recovery in [Chinese tourist] traffic after the outbreak and weakness [in the shares] provides a good opportunity for investors."
In 2014, a record high of six million Chinese tourists travelled to South Korea, boosting the country's domestic consumption. The figure declined by 32 percent this year due to the outbreak.
Global Cosmetics News reported on Thursday LG H&H, South Korea's number two cosmetics company, said it will invest $321.7 million in effort to propel global expansion by building a new factory by 2020.
Meanwhile, South Korea's number one cosmetics company AmorePacific Group aims to rise as Asia's number one cosmetics maker, with a sales target of $8.2 billion by 2020, reported NIKKEI Asian Review on Sept. 10. The company is also targeting to increase its worldwide sales from 20 percent to 50 percent.
Fortunately, tourism in South Korea is gradually coming back to its vibrant state, with 300,000 Chinese tourists visiting the country in the first two weeks of September.
The Korea International Trade Association also reported a $378.3 million worth of Korean cosmetics exports to China from January to July of 2015.
"Local Chinese brands are growing very quickly in lower-tier cities and [posing intense] competition in higher-tier cities," said Mr. Shin, online retailer VIP Shop Korea's CEO. "Furthermore, Chinese consumers are becoming increasingly attracted to Japanese products [because] product quality is high and prices have become more affordable. Only AmorePacific's 'Sulhwasoo' and LG H&H's 'WHOO' are well positioned to survive."
