Japanese stocks trading on the Korean markets have taken toll from the diplomatic row between Seoul and Tokyo that has spilled over to the economic front and fueled negative public sentiment towards Japanese names.
Shares of Japanese game publisher SNK Corp. finished Monday 6.05 percent lower at 19,400 won ($16.45) in Seoul trading. Duty-free store operator Japanese Tourism Corp. (JTC) also lost 5.8 percent to close the day at 6,660 won, with payment gateway provider SBI FinTech Solutions Co. off 8.13 percent at 15,250 won.
Investors in Korea turned anxious about a full-fledged faceoff between the two neighboring nations heavily interconnected in manufacturing from electronics to heavy industries after President Moon Jae-in warned of “necessary” actions if Japan’s embargo move causes real damages to Korean companies. Tokyo responded that it won’t retract its actions nor sit down with Seoul to talk out differences.
Since Japan imposed regulation requiring prior consent for every shipment to Korea in three key materials necessary to produce chips and displays that are responsible for a quarter of Korean exports last week, some Korean consumers voluntarily launched boycott on Japanese brands and cancelled trips to Japan, the most favorite overseas destination for Koreans.
From July 1 when the Japanese government announced the retaliatory move, SNK shares plunged 21.9 percent as of Monday, JTC 15.5 percent, and SBI FinTech Solutions 15.3 percent. Shares of SBI Investment Korea Co., wholly-owned by the Korean entity of Japan-based SBI Holdings, also dipped 11.6 percent over the same period.
Analysts warn the selloff is unreasonable, given the positive outlook of the underlying companies.
JTC is expected to see earnings growth this year on a rise in the number of tourists to Japan before the 2020 Summer Olympics in Tokyo. According to Seoul-based financial data provider FnGuide, JTC’s operating profit is estimated to grow 67.6 percent on year to 29 billion won for the fiscal year ended February 2020, with sales up 25.3 percent at 650 billion won.
SNK with a heavy reliance on the intellectual property (IP) licensing business in China is unlikely to be hit hard by the trade tensions between Korea and Japan, analysts said. It generates 62.4 percent of its revenue from the IP licensing business, of which 78 percent comes from China.
SBI FinTech Solutions, however, is expected to be hit to some extent by the deteriorating diplomatic relations in the long term as it generates 47 percent of its revenue from international remittance services and 40 percent from payment services.
On Tuesday, shares of SNK closed 1.8 percent higher at 19,750 won, and JTC 2.1 percent up at 6,800 won. SBI FinTech Solutions fell 0.66 percent to end at 15,150 won.
By Yoo Joon-ho and Lee Ha-yeon
[ⓒ Pulse by Maeil Business Newspaper & mk.co.kr, All rights reserved]