[THE INVESTOR] The market values of Korean firms eyeing the Chinese market have shrunk significantly, as their stock prices have been falling for the past two months since the South Korean government announced the deployment of a US missile defense system on the Korean Peninsula.

According to the Korea Exchange on Wednesday, the market values of 10 major businesses exporting products to China or operating in the market have shed nearly 7 trillion won ($6.42 billion) in total in the past two months. 

The aggregate market capitalization of the 10 companies, including AmorePacific and LG Household & Healthcare, stood at 54.9 trillion won as of Tuesday, down 11.2 percent, or 6.9 trillion won, from July 7, the day before the government’s announcement was made. 

Their stock prices plunged in the month after news broke, although some have rebounded recently ahead of the Korea-China summit.

Entertainment businesses took a serious blow from the Terminal High Altitude Area Defense system issue. S.M. Entertainment’s stock price plummeted nearly 26 percent from 38,500 won on July 7 to 28,500 won as of Tuesday. YG Entertainment’s stock price slid 17.3 percent during the same period.  

China’s opposition toward the THAAD system has affected Korean firms that were gaining momentum in the country. Performances of Korean stars there were abruptly canceled in July and broadcasts of TV dramas featuring Korean actors have been postponed.

LG Household & Healthcare’s preference shares nose-dived 21 percent from 688,000 won to 543,000 won. Korea’s No. 1 cosmetics-maker AmorePacific plunged 12 percent, from 252,500 won to 222,000 won. Ordinary shares of the cosmetics firm tumbled from 441,000 won to 379,500 won as of Aug. 8, but rebounded to 398,000 won due to increased cosmetics exports in August.

CJ E&M and CJ CGV, both major providers of Korean broadcasting and movie content to China, fell 2 percent and 7.5 percent each over the two months. 

“Since there is no improvement or aggravation of the issue even after the summit, anxiety remains in the market,” said Park Sang-hyun, head of investment strategy at HI Investment & Securities. “There is a need to monitor what kind of action China would take for a while.”

For the past two months, the Kospi soared 4.7 percent from 1,974.08 points to 2,066.53 points.

However, some market watchers say these THAAD-affected shares might see unsolicited gains from rising concerns about the possible second US interest rate hike this month or in December.

“Those China-related stocks would be able to avoid the US rate hike factor,” said Kim Byoung-yeon, an analyst at NH Investment & Securities. “Because investor sentiment about these stocks has been unfavorable recently, they might see an improvement from now on.”

“As cosmetics exports showed steady growth and Chinese tourists are still traveling to the country, demand for Korean cosmetics and household items is on the rise,” Kim added.

The analyst recommended a buy approach to household, health care and cosmetics-related stocks. 

By Song Su-hyun/The Korea Herald (song@heraldcorp.com)