With the South Korean government under pressure to join the U.S. sanctions on China’s Huawei, investors, reminded of the past political rows between Seoul and Beijing over a U.S. anti-missile system that had taken a heavy toll on Korean companies with exposure to China, hurriedly dumped about 2.6 trillion won ($2.2 billion) worth of Korea’s China-sensitive stocks last week.

According to the country’s sole stock exchange operator Korea Exchange on Sunday, the stock price of 17 Korean companies with great exposure to the Chinese consumer market plunged by an average 8.16 percent between May 20 and 24 when the U.S. government ratcheted up its pressure on allies to join its sanctions on China’s Huawei, the world’s biggest telecommunications equipment maker, as an extension to the deepening trade war between the two superpowers. The market capitalization of the 17 China-sensitive Korean stocks plummeted 2.58 trillion won during the same period.

Shares of cosmetics-related stocks, in particular, were dragged down by the most last week. Shares of Tonymoly, a Korean beauty brand, plunged 19.83 percent, while those of Able C&C Co., a retailer of budget makeup brands, 9.46 percent, AmorePacific Corp. 9.37 percent, and Hankook Cosmetics Manufacturing 8.98 percent.

Shares of F&F Co., a fashion company that is growing fast in the Chinese market with MLB brand, also lost 14.53 percent.

Tourism, casino and duty-free store shares were also hit hard.

Shares of Modetour, a well-known travel agency in Korea, skid 5.94 percent, while those of Hanatour 5.78 percent, and Paradise Casino 5.41 percent. Shares of Hotel Shilla, operator of duty-free shops, also fell 5.02 percent.

The 17 stocks, which fell 8.16 percent on average in the cited period, underperformed the country’s main Korea Composite Stock Price Index (Kospi) and the secondary market Korea Securities Dealers Automated Quotation (Kosdaq) losing 0.51 percent and 3.37 percent, respectively.

Market analysts noted that their decline was accelerated following the news that the U.S. government reportedly has pressured Korea to refrain from using Huawei gear in the sprawling cold war between the U.S., Korea’s biggest ally, and China, its largest trading partner. This has spurred concerns among investors that if Korea joins the U.S. sanctions on China’s Huawei, it could become a target of economic retaliatory actions by the Beijing government as in the past when it banned Korean goods after Korea deployed a U.S. Terminal High Altitude Area Defense (THAAD) anti-missile system on its soil, which the Chinese government sees as a security threat to its country.

Hana Financial Investment Co. said that there is a possibility that China may retaliate against Korea if it joins America’s anti-Huawei campaign.

The market capitalization of 10 China-related stocks in Korea lost 13.5 trillion won or 22 percent over four months until early November after the Korean government announced its decision to deploy the U.S. anti-missile system in July 2016.

By Chung Hee-young and Lee Eun-joo

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