China roils S Korean stocks with news of travel curbs

Bloomberg

China has the economic power to move markets, and it isn’t afraid to use it. South Korean stock trading offered a case in point, with a selloff in hotels, cosmetic makers and other tourism-related companies that made the country’s benchmark the worst performer among Asian equity markets.
The slide followed a Yonhap news agency report on China
ordering travel agents to halt sales of holiday packages to South Korea.
The news comes amid tensions between the two nations over South Korean intentions to deploy an American missile defense system that China says would upset the military balance on the Korean peninsula. The broader takeaway: while South Korea has given no indication it would change its plans, there can be risks of economic damage — at least for a time — that offer investors both dangers and opportunities.
“There is actually no industry in Korea that is free from THAAD risks,” said Jung Sang Jin, who helps manage the equivalent of $33 billion at Korea Investment Management Co. in Seoul, using the abbreviation for the US missile-defense system. “Many companies have plants in China, and China could halt operation at those plants.”
Among the holdings of Jung’s employer is Amorepacific Corp., South Korea’s biggest cosmetics company. Chinese authorities have ordered the destruction of about 700 kilograms of Amorepacific’s imported product, saying they included bacteria. The company slid 13 percent Friday.
Calls to China’s tourism administration to ask about the Yonhap report on the travel restrictions weren’t answered. Geng Shuang, spokesman for China’s foreign ministry, said Friday he wasn’t aware of any measures taken by the tourism body at this time. Kim Yeong Ju, an official at South Korea’s Korea Tourism Organization, said its Chinese counterpart issued the ban, which also covers flights to South Korea and hotel bookings. Almost 50 percent of the foreign visitors to Korea in 2016 were from China, according to the KTO.

BACK STAB
Lotte Group, the Korean shopping mall and hotel giant, earlier this week agreed to provide land for the THAAD project, which the US and South Korea agreed upon in July, triggering the latest chapter of tensions between the countries. “The decision to deploy THAAD is like stabbing us in the back,” Cheng Yonghua, China’s ambassador to Japan, told Bloomberg News Friday. “Regional security issues need to be settled via negotiation and communication.” Korea’s embassy in Beijing advised citizens in China to pay attention to personal safety, according to a statement on their website.
South Korean tourism and consumer stocks were among the benchmark Kospi 200 index’s best performers until the second half of 2015, largely on the back of surging Chinese demand. Hotel Shilla Co., a hotel and duty-free store chain, also sank 13 percent Friday. Shilla, a unit of the Samsung group, has slumped more than 50 percent from a record reached in September 2015.