South Korean stocks are underperforming their regional peers this year, but one bright spot has emerged as the country's cultural exports gain popularity overseas: consumer stocks.
AmorePacific Group and LG Household & Healthcare (LG H&H) – the country's top cosmetics makers – outperformed last year, rallying 183 and 16 percent respectively. By contrast, traditional Kospi index heavyweights Samsung Electronics and Hyundai Motor fell nearly 5 and 30 percent as cut-throat competition weighed on sales.
That trend appears unlikely to change as Hallyu – the Korean term for the popularity of South Korean pop-culture abroad – continues to spur the fashion and tourism industries. The meteoric success of last year's K-drama "My love from the Star" boosted sales of luxury items and cosmetics adorned by lead actress Gianna Jun. For one, a neon orange lipstick by AmorePacific's beauty brand Laneige sold out in countries including China and Singapore.
According to government data, South Korea's cosmetics exports surged 52 percent on-year in 2014, amid increased demand from China. This underpinned 52 and 31 percent jumps in AmorePacific and LG H&H's operating profit, respectively, last year.
"if you look at Chinese inbound travel into Korea, it's proof that Seoul (and Jeju) are now firmly on the map and anything Korean is cool in the eyes of Chinese (and many other Asian) consumers," Erwan Rambourg, managing director and global co-head of consumer and retail at HSBC, told CNBC. "Also, many of the successful brands are just starting to develop in terms of awareness so I believe [in terms of sales] they still have legs."