Fears of Chinese backlash over missile defence hit S Korean stocks
SEOUL: South Korean stocks fell sharply on Friday after media reported China had ordered tour operators in Beijing to stop selling trips to the country, in suspected retaliation for the deployment of a US missile defence system outside Seoul.
Cosmetics makers, retailers, carmakers and airlines were among the biggest losers as South Korea's main benchmark index fell 1.3 per cent in afternoon trade, weighed down by fears that China may choke off a key source of tourist dollars.
Cosmetics firm Amorepacific fell almost 12 per cent to its lowest level in more than two years, while duty free retailer Hotel Shilla tumbled as much as 13 per cent. South Korea is the world's biggest duty free market.
Hyundai Motor Co dropped almost 5 per cent after photos of a vandalised Hyundai car circulated on Chinese social media.
Chinese authorities did not respond to requests for comment. South Korea's tourism ministry also did not respond.
While Chinese state media have called for people to shun South Korean goods, an editorial in influential state-run tabloid Global Times struck a note of caution on Friday, warning that the person who vandalised the Hyundai car "won't win the support of mainstream public opinion".
"If it is proved to be related to (the missile issue), such illegal behavior is a smear on the public boycott campaign," it said.
Even so, South Korean political parties condemned the Chinese backlash.
"It's despicable and arrogant. China is a G20 nation that should be leading the development of world order," Liberty Korea Party leader Chung Woo-taik said.
COLLATERAL DAMAGE
Seoul and Washington say the Terminal High Altitude Area Defense (THAAD) system is designed to thwart attack from nuclear-armed North Korea, but Beijing says its far-reaching radar is targeted at China.
South Korean companies have reported difficulties in China since Seoul and Washington in July agreed to deploy the system in response to North Korean missile threats. South Korean artists have also said performances have been cancelled.
But the escalating tension and Chinese media calls for retaliation have rattled investors, fearful of a repeat of previous Chinese backlashes against Japan over territorial disputes and interpretations of history.
Along with tour operators, the auto sector was particularly vulnerable as China had targeted Japanese carmakers in earlier disputes, analysts said.
"The current political tension is a reminder of the territorial disputes between China and Japan in the past," said Ko Tae-bong, an auto analyst at Hi Investment & Securities in Seoul.
"I'm concerned that China is harassing Korean carmakers, even at the risk of hurting its own companies."
Hyundai is in a joint venture with a Chinese company to produce cars in China.
The number of Chinese tourists to South Korea nearly quadrupled to 8 million over the past five years, accounting for nearly half of foreign visitor numbers, government data shows.
Chinese are by far the biggest spenders, propping up South Korea's duty free market which generates about $8 billion in annual sales.
"The reaction of the Chinese government against Korea's THAAD deployment appears harsher than expected," Citi said in a report, calling duty free shops and cosmetics firms "direct casualties".
Attempts to book Korean tours on several of the biggest operators in China produced mixed results. Two companies were prepared to accept a booking but one declined because of the THAAD issue.
China Youth Travel Service said they were still selling Korean travel packages and were not aware of any order to stop.
South Korean firm Lotte Duty Free, which relies heavily on Chinese tourists at its up-market stores, on Thursday said a cyber attack originating from China crashed its website. One of its affiliates on Monday approved a land swap to allow the missile system to be deployed.
Most of the company's websites were running normally on Friday, but its Chinese portal was loading more slowly than usual.
Cosmetics makers, retailers, carmakers and airlines were among the biggest losers as South Korea's main benchmark index fell 1.3 per cent in afternoon trade, weighed down by fears that China may choke off a key source of tourist dollars.
Cosmetics firm Amorepacific fell almost 12 per cent to its lowest level in more than two years, while duty free retailer Hotel Shilla tumbled as much as 13 per cent. South Korea is the world's biggest duty free market.
Hyundai Motor Co dropped almost 5 per cent after photos of a vandalised Hyundai car circulated on Chinese social media.
Chinese authorities did not respond to requests for comment. South Korea's tourism ministry also did not respond.
While Chinese state media have called for people to shun South Korean goods, an editorial in influential state-run tabloid Global Times struck a note of caution on Friday, warning that the person who vandalised the Hyundai car "won't win the support of mainstream public opinion".
"If it is proved to be related to (the missile issue), such illegal behavior is a smear on the public boycott campaign," it said.
Even so, South Korean political parties condemned the Chinese backlash.
"It's despicable and arrogant. China is a G20 nation that should be leading the development of world order," Liberty Korea Party leader Chung Woo-taik said.
COLLATERAL DAMAGE
Seoul and Washington say the Terminal High Altitude Area Defense (THAAD) system is designed to thwart attack from nuclear-armed North Korea, but Beijing says its far-reaching radar is targeted at China.
South Korean companies have reported difficulties in China since Seoul and Washington in July agreed to deploy the system in response to North Korean missile threats. South Korean artists have also said performances have been cancelled.
But the escalating tension and Chinese media calls for retaliation have rattled investors, fearful of a repeat of previous Chinese backlashes against Japan over territorial disputes and interpretations of history.
Along with tour operators, the auto sector was particularly vulnerable as China had targeted Japanese carmakers in earlier disputes, analysts said.
"The current political tension is a reminder of the territorial disputes between China and Japan in the past," said Ko Tae-bong, an auto analyst at Hi Investment & Securities in Seoul.
"I'm concerned that China is harassing Korean carmakers, even at the risk of hurting its own companies."
Hyundai is in a joint venture with a Chinese company to produce cars in China.
The number of Chinese tourists to South Korea nearly quadrupled to 8 million over the past five years, accounting for nearly half of foreign visitor numbers, government data shows.
Chinese are by far the biggest spenders, propping up South Korea's duty free market which generates about $8 billion in annual sales.
"The reaction of the Chinese government against Korea's THAAD deployment appears harsher than expected," Citi said in a report, calling duty free shops and cosmetics firms "direct casualties".
Attempts to book Korean tours on several of the biggest operators in China produced mixed results. Two companies were prepared to accept a booking but one declined because of the THAAD issue.
China Youth Travel Service said they were still selling Korean travel packages and were not aware of any order to stop.
South Korean firm Lotte Duty Free, which relies heavily on Chinese tourists at its up-market stores, on Thursday said a cyber attack originating from China crashed its website. One of its affiliates on Monday approved a land swap to allow the missile system to be deployed.
Most of the company's websites were running normally on Friday, but its Chinese portal was loading more slowly than usual.
