[Edaily Reporter Kim Kyung-eun ] As the domestic stock market enters a trading range, cosmetics stocks—which recently underwent a sharp correction—are now being tested for a rebound. While rotational trading is shifting toward some cosmetics stocks as established market leaders, such as semiconductor stocks, waver, stock prices are showing mixed performance. Although the industry itself remains strong, risks associated with the strong won mean that a “selective buying” market trend is expected to become more pronounced.

According to MP Doctor on the 15th, the KOSPI closed at 6,637.26, down 57.11 points (0.85%) from the previous trading day. Semiconductor stocks, including SamsungElectronics and SK hynix, also ended the day in negative territory. In contrast, buying interest flowed into some cosmetics stocks. Expectations are growing that, as the upward momentum of traditional leading stocks slows, capital may shift toward previously neglected sectors.

On this day, #AROMATICA CO. closed at 12,870 won, up 820 won (6.80%) from the previous trading day. Bonne Co., Ltd.(226340)also closed at 4,980 won, up 280 won (5.96%). LG H&H(051900)rose 1%, and LG H&H(1P)(051905)rose 3.08%.

In contrast, APR(278470), the cosmetics company with the highest market capitalization, closed at 361,500 won, down 7,500 won (2.03%). KOLMAR KOREA(161890)(-1.10%), COSMAX, INC.(192820)(-1.09%), and #d'Alba Global (-2.68%) also saw declines.

The mixed performance of cosmetics stocks is attributed to differences in each company’s sensitivity to the strong won—which has recently weighed on the sector as a whole—and their overseas sales structures. Cosmetics stocks rose sharply in July and August, buoyed by strong exports, but have undergone a sharp correction this month due to a combination of the strong won and valuation concerns.

In particular, APR, which derives a high proportion of its revenue from the U.S., and SILICON 2 Co.,Ltd.(257720), which relies heavily on exports, saw relatively sharp declines due to exchange rate concerns. This was driven by pressure on stock prices stemming from concerns that a rise in the value of the won could reduce the won-denominated value of revenue earned overseas.

APR surged 45.16% last month but has fallen 22.17% so far this month. SILICON 2 Co.,Ltd. also rose 59.65% last month but has since dropped 19.46% this month. Original Design Manufacturer (ODM) companies such as KOLMAR KOREA (-9.74%), COSMAX, INC. (-9.00%), and COSMECCA KOREA CO.,LTD. (-15.49%) have also experienced corrections of around double digits so far this month.

In contrast, the stock prices of traditional cosmetics companies such as LG H&H (-3.51%) and AMOREPACIFIC CORPORATION (-2.17%) have remained relatively resilient. Analysts note that, compared to companies with an overwhelmingly high proportion of exports, these firms are relatively less sensitive to exchange rate fluctuations in terms of earnings.

Kim Myung-ju, an analyst at Korea Investment & Securities, predicted, “If the won continues its upward trend, the stock prices of LG H&H and AMOREPACIFIC CORPORATION could remain relatively resilient within the cosmetics sector.”

The securities industry expects the process of separating the wheat from the chaff among cosmetics stocks to continue for the time being. While the perception that the recent stock price decline was excessive is fueling expectations of a rebound, each company differs in terms of exchange rate sensitivity, overseas sales structure, and valuation.

The cosmetics industry itself continues to show strong momentum. According to Korea Investment & Securities, cosmetics exports from September 1 to 10 totaled $406.8 million, a 46.1% increase compared to the same period last year. This also represents a 17.4% increase compared to the same period last month. In particular, exports to the U.S. rose 32.8% year-over-year, reaching an all-time high for the period from September 1 to 10. The global shopping season in the fourth quarter—the industry’s peak season—is also cited as a factor that could drive a rebound in cosmetics stocks.

Park Hyun-jin, an analyst at Shinhan Investment Securities, explained, “If the won continues to strengthen, there is a possibility that overseas sales revenue converted to won terms could be diluted in the fourth quarter,” but added, “The impact of exchange rates on profits is neutral, as the burden of imported raw material costs and overseas labor costs has decreased.” He continued, “Amid rising oil prices, freight costs are expected to be similar to those in the second quarter of this year,” but added, “Ultimately, the leverage effect resulting from increased demand will offset these cost burdens.”