The return of Chinese visitors to South Korea has lifted the outlook of Korean retail and cosmetics industries that had borne the brunt of Seoul’s yearlong diplomatic row with Beijing.

Kiwoom Securities Co. issued a report on Monday that forecast strong growth in local duty-free sales thanks to the return of big-spending Chinese shoppers to Korea.

The average selling price of duty-free shops in Seoul was up 15 percent in February from a year earlier on the back of Chinese merchants, who buy foreign goods in bulk to resell them at home, according to the brokerage. It also expected first quarter sales of duty-free stores to surge 12 to 13 percent in dollar terms.

The report’s optimistic outlook stemmed from the growing number of Chinese visitors to Korea. The country received 510,000 Chinese tourists last month, the first time for the number to recover the 500,000 mark since Beijing’s ban on group tours took effect.

In March 2017, tensions had flared up between the two countries over Seoul’s deployment of an anti-missile system that led Beijing to impose a travel ban on group tours to Korea. While Korea insisted that the missile shield was purely to counter North Korea’s missile threats, China saw its powerful radar as a threat to its military.

The travel ban was in place for nearly a year, halving the number of inbound Chinese tourists and devastating tourism and other related industries in Korea that relied heavily on Chinese shoppers.

But tensions have since thawed and the two countries have started engaging in talks to improve relations in various sectors. Most recently, they agreed to expand Korea-China air routes, a move Kiwoom said is expected to drive more Chinese tourists to Korea.

Another local brokerage, Kyobo Securities Co., also noted the resurgence in the number of Chinese tourists and upped its buy recommendations for cosmetics stocks. In its report on Monday, it projected full recovery in Chinese visitor levels, citing the 48 percent on-year jump in the number of Chinese tourists in February. The sector to benefit the most was cosmetics, it said, adding that total cosmetics exports were up 21 percent and those to China up 52.3 percent last month from the year-ago period.

Cosmetics stocks were lifted following the rosy outlook. Shares of Korea’s leading beauty brand AmorePacific closed Monday up 4.08 percent at 204,000 won ($180.2) and those of cosmetics original development manufacturer Cosmax up 5.42 percent at 155,500 won.

Shares of Hotel Shilla finished 7.33 percent higher at 93,700 won.

By Moon Il-ho and Kim Hyo-jin

[ⓒ Pulse by Maeil Business Newspaper & mk.co.kr, All rights reserved]