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Chinese Tourism Curbs Hit Korean Shares

A Chinese crackdown on the unregulated travel industry has impacted shares of Korean companies dependent on revenues from Chinese tourists.

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Beijing recently announced tougher rules for travel agents including fines of up to W50 million on operators that sell cut-price packages to Korea with the aim of herding travelers into shops here that pay commissions (US$1=W1,135).

Some provincial governments in China have told travel agencies within their jurisdictions to cut the number of tourists to Korea by 20 percent and to limit shopping during the trips to one day.

The news sent the Korea Composite Stock Price Index down 0.52 percent to 2,037.17 points on Tuesday as shares in cosmetics, hotels and other companies dependent on sales from Chinese tourists sank.

Shares of cosmetics giant Amore Pacific plunged 7.2 percent, while LG Household and Healthcare, Cosmax and Hankook Cosmetics fell more than eight percent. Hotel Shilla fell 6.9 percent, Shinsegae Department Store six percent, casino operator GKL 6.8 percent and YG Entertainment 2.26 percent.

The tech-heavy Kosdaq market was not immune to the negative news, falling below the psychologically important 640 point level at one point in trading, but rebounded to close down 1.19 percent at 640.17, the lowest since Feb. 18.

The Chinese crackdown is aimed at protecting citizens from being scammed by cheap tour packages, but some scent retaliation for Korea's decision to let the U.S. station a U.S. Terminal High-Altitude Area Defense battery here.

Lee Kyung-min at Daeshin Securities said, "Fears spread over additional retaliatory measures over the THAAD deployment, causing shares related to Chinese tourists to fall steeply".

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