[THE INVESTOR] South Korean retailers and cosmetics companies are closely watching China’s moves after Korea and the US decided to deploy an advance missile defense system in the country on July 8.

Neighboring China lodged a swift protest against the decision announced in the morning which is expected to further heighten geopolitical risks.

Local cosmetics makers and duty-free shops are on alert as they worry about losing Chinese market and consumers who account for a growing portion of their revenues. 

On the day, cosmetics stocks like LG Household & Health Care and AmorePacific plunged more than 4 percent.

“The THAAD issue was a huge blow to Cosmetic stocks earlier this year and it happened again,” an official at a cosmetics company said.

South Korea’s cosmetics exports to China doubled on-year to US$1.08 billion in 2015, which accounts for nearly 40 percent of global sales, according to the Korea International Trade Association. South Korea is the second-largest cosmetics exporter to China following France.

“There hasn’t been an immediate impact so far as China hasn’t took any trade-related actions but we still have to keep an eye on the issue,” she said.

If ties between the two countries weaken, China could tighten regulations on safety and tariff issues, experts said.

Retail companies, which started to see a rebound in the number of Chinese tourists to Korea after a sharp drop due to the Middle East respiratory syndrome outbreak hit the country last year, are in panic mode.

“We are worried over the possible drop in the number of tourists coming here if political conflicts drag on for long,” said an official at a duty-free store in Seoul.

By Park Han-na (hnpark@heraldcorp.com)