[LINK] "Missile Spat Cools Korean Consumer Stock Stars on China Threats"

[rfmcdonald]

Heejin Kim of Bloomberg notes that Chinese upset at the South Korean deployment of an anti-missile defense system might derail the two countries' close relationship.

South Korean consumer shares, 2015’s stock-market darlings as tourists from China flocked to Seoul department stores, are now among the nation’s worst performers this year as a missile spat cools relations between the neighbors.

A measure of such companies on the MSCI Korea Index has tumbled 5.9 percent in 2016 through Wednesday after its best annual gain in a decade sent valuations to a four-year high relative to the broader gauge. Orion Corp., a confectioner that earns more than half its revenue in China, and cosmetics maker Amorepacific Corp. are among the biggest decliners as the U.S. and South Korea consider installing the Thaad missile-defense system on the peninsula.

Policy makers in Beijing have objected, saying the shield designed to protect against North Korea’s nuclear threat covers more Chinese territory than the Koreas combined. Kee Hosam, a money manager at Dongbu Asset Management Co., recalls how Japanese stocks were sold off in 2012 amid a spat with China over islands in the East China Sea. The suspension of government-level exchanges or trade sanctions have been used in similar disputes.

“We can’t help worrying about China’s response,” said Seoul-based Kee, who helps oversee $10.6 billion in assets and has offloaded consumer plays linked to China from his portfolio. “We are concerned an unexpected issue could break out due to the conflict over Thaad.”