Regulations Strike Amid Unstable Market... Investors Growing Increasingly Concerned

Market Cap of Kakao and Naver Drops by 12 Trillion Won Due to Online Platform Regulations
Chinese Regulations Also Weigh Down... Continued Decline in Gaming, Education, and Entertainment Stocks

[Asia Economy Reporter Song Hwajeong] As the KOSPI still fails to recover the 3200 level, various regulatory issues have emerged, deepening investors' concerns.

As of 9:15 a.m. on the 9th, Naver (NAVER) was trading at 401,000 KRW, down 8,500 KRW (2.08%) from the previous day. During the session, it even fell below the 400,000 KRW mark. Kakao recorded a 4.33% decline to 132,500 KRW. Kakao has been falling for four consecutive days, and Naver for three days.

Naver and Kakao's stock prices plunged more than 10% and 7%, respectively, after political circles and financial authorities showed moves to regulate internet platform operators the previous day. The combined market capitalization of the two companies evaporated by more than 12 trillion KRW in just one day. The ruling party, the Democratic Party of Korea, publicized regulatory measures against unfair trade on online platforms the day before, and financial authorities judged financial platform services related to financial products by Kakao Pay and Naver Financial as 'intermediation' under the Financial Consumer Protection Act (FCPA) and demanded corrective actions.

In the securities industry, opinions are that the stock price declines of Naver and Kakao are excessive. Samsung Securities researcher Oh Donghwan said, "Domestic government platform regulations focus on consumer protection and improvement of unfair trade, so the possibility of restricting domestic platform companies' business activities is considered low," adding, "Although external risks are increasing, no regulations that could affect the fundamentals of Naver and Kakao have yet occurred, so this week's stock price decline is excessive."

Recently, regulations originating from China have also led to weak stock prices in related sectors. China has recently expanded regulations from the gaming and education sectors to the entertainment industry. Due to Chinese regulations, YG Entertainment's stock price recently broke below the 60,000 KRW level, and SM Entertainment also fell below the 70,000 KRW mark. JYP Ent. broke below 40,000 KRW during trading on the 6th and again fell below 40,000 KRW during trading on this day. HYBE showed a slight decline, falling below the 280,000 KRW level. It has been continuously declining for three consecutive days. Mirae Asset Securities researcher Park Jeongyeop said, "Although the Chinese entertainment industry regulations have recently slowed the rise in domestic entertainment companies' stock prices, the actual impact of the regulations on earnings is much smaller than expected," and added, "Chinese regulations are only temporary variables, so I recommend increasing holdings by viewing the adjustment as an opportunity."