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‘Vice stocks’ up as booze and gambling beat slump

Dec 17,2018
As the year end nears, stock traders in Korea are focused on “vice shares.”

Despite recent general weakness in the market, vice shares - stocks related to guilty pleasures such as alcohol, cigarettes and gambling - have been on an upswing.

The shares have traditionally risen toward the end of the year as consumption increases. They also exhibit strength during recessions, as these products are some of the last to be abandoned by consumers, resulting in stable to strong earnings

Shares of Kangwon Land, the company behind Kangwon Land Resort & Casino, closed at 32,650 won ($29) on Friday, rising over 12 percent since it closed at 28,950 won on Aug. 31.

Shares of Lotte Chilsung Beverage, known for Chum Churum Soju, rose 9.56 percent over the same period. Shares of cigarette company KT&G added 7.43 percent since Aug. 31.

Alcohol and cigarette shares are not only popular due to the increase in consumption at the end of the year but also because of high dividends

The dividend rate for alcohol company Hite Jinro, based on last year’s earnings, was 4.15 percent, more than twice the average Kospi dividend rate of 1.86 percent. The dividend rate for KT&G was 3.7 percent, and Kangwon Land 3 percent.

Future expectations also account for the rise in shares.

“Hite Jinro’s operating earnings will be better next year than this year,” said Cho Sang-hoon, an analyst at Samsung Securities. “Sales figures for sparkling wine are expected to be favorable, and with the increase of imported beer, the company may report an operating profit next year.”

“Lotte Chilsung is maintaining good sales with its low-alcohol soju,” explained Kim Hyemi, an analyst at Baro Investment & Securities.

The casino industry is expected to see growing sales with the increase in Japanese and Chinese tourists.

“Japanese tourists numbers are increasing with the easing of the nuclear threat,” said Park Sung-ho, an analyst at Yuanta Securities.


BY LEE HOO-YEON [chae.yunhwan@joongang.co.kr]