By Lee Hyo-sik
Shares of AmorePacific, LG Household & Health Care and other cosmetics makers fell sharply Monday in response to growing regulatory risks at home and abroad, according to analysts.
Investors dumped cosmetics stocks, following the recent move by the Korea Customs Service (KCS) to limit the number of beauty products that an individual can purchase at duty free stores to 50.
In addition, China’s decision to tighten sanitary rules on Korean and other imported cosmetics products later this year have also dampened investor sentiment, driving many to realize capital gains on cosmetics stocks, which jumped sharply over the past few months.
Shares of AmorePacific fell 2.06 percent, or 8,000 won, to 380,000 won per share Monday from last Friday, while that of LG Household & Health Care plunged 6.05 percent, or 61,000 won, to 947,000 won. Shares of TonyMoly, It’s Skin and other mid-sized cosmetics brands were also hit hard by the increasingly pessimistic market outlook.
“It will take some time for KCS to finalize the controversial step and put that into force,” said Han Kook-hee, an analyst at NH Investment & Securities. “I think limiting the number of cosmetic products sold per person targets those who hoard and realize illicit profits, not ordinary travelers. But still it is expected to have largely negative effects on the cosmetics sector.”
The customs agency said last Friday that it will ban individuals, both Korean and non-Korean, from buying more than 50 cosmetics goods at duty free stores in order to prevent hoarding and other dubious activities.
About 25 percent of cosmetics goods are sold at duty free shops. AmorePacific relies on duty free stores for about 40 percent of its sales, and LG Household & Health Care 30 percent.
However, cosmetics makers say KCS’s planned guideline will not adversely affect their sales.
“We are already limiting the number of goods per individual to 20. So, even if the guideline goes into effect, it has nothing to do with us,” an LG Household & Health Care spokeswoman said.
In response to China’s tightening of sanitary rules on beauty products, the spokeswoman said “What the Chinese government wants to do is to reduce the amount of harmful substances contained in cosmetics. Our products already contain less harmful materials than required under the strengthened standard.”