[MarketING] K-Pop Popularity Boosts Entertainment Stocks: "I'm the Best"

KOSPI Falls for Fourth Consecutive Day... Drops to 2470 Level
KOSDAQ Fails to Sustain Early Gains, Closes Lower

The KOSPI continued its decline for the fourth consecutive day, falling to the 2470 level. Amid uncertainty over the U.S. debt ceiling negotiations and concerns about an economic recession, investor sentiment weakened, and the Korean won also showed weakness, leading to foreign selling pressure that dragged the index down. In the subdued market atmosphere, entertainment stocks with clear price momentum, such as strong earnings and K-pop popularity, stood out with notable price movements.

KOSPI Weakens for Four Days Due to Foreign and Institutional Selling

On the 12th, the KOSPI closed at 2475.42, down 15.58 points (0.63%) from the previous day. The KOSDAQ ended the session at 822.43, down 2.11 points (0.26%). The KOSDAQ failed to maintain its early gains and closed lower, while the KOSPI lost the 2480 level.

[Image source=Yonhap News]

Foreigners and institutions led the KOSPI decline. Foreigners and institutions sold a net 248.3 billion KRW and 106.7 billion KRW, respectively, in the securities market. Individual investors bought a net 358.6 billion KRW. Foreigners also continued their net selling in the KOSDAQ market for the seventh consecutive trading day, offloading 49.8 billion KRW.

Seokhwan Kim, a researcher at Mirae Asset Securities, analyzed, "Investor sentiment weakened due to uncertainty over the U.S. debt ceiling negotiations and recession concerns, and the widening depreciation of the won against the dollar increased selling pressure from foreigners and institutions, intensifying downward pressure on the KOSPI." As safe-haven asset preference emerged, the won-dollar exchange rate in the Seoul foreign exchange market closed at 1,334.5 KRW, up 8.2 KRW from the previous day's close. The won-dollar exchange rate has risen for four consecutive days recently.

Although foreigners continued selling in the KOSDAQ market, the stock they bought the most on the day was KOSDAQ-listed YG Entertainment. Foreigners purchased 42.3 billion KRW worth of YG Entertainment shares. Institutions also bought a net 3.2 billion KRW. Supported by foreign and institutional buying, YG Entertainment surged 17.09% from the previous day to close at 78,100 KRW. During the session, it rose to 79,500 KRW, setting a 52-week high. YG Entertainment, which has risen for three consecutive days, saw its market capitalization increase from 1.1964 trillion KRW at the beginning of this month to 1.4578 trillion KRW.

YG Entertainment's sharp rise led to strength across the sector. JYP Entertainment (JYP Ent.) rose 2.50%, and HYBE also increased by 1.62%. Researcher Kim explained, "YG Entertainment led the sector's rise by showing strength due to strong earnings and expectations for new artists."

Entertainment Stocks Gain Attention with Strong Earnings Amid Stock-Specific Market

The strength of entertainment stocks is attributed to strong earnings, supported by K-pop popularity and clear price momentum from new artists.

The previous day, YG Entertainment disclosed that its operating profit for the first quarter of this year was 36.5 billion KRW, a 497.6% increase compared to the same period last year. Sales also rose 108.6% to 157.5 billion KRW during the same period. Kihoon Lee, a researcher at Hana Securities, commented, "The scale of BLACKPINK's world tour and the corresponding sponsor-related sales were reflected all at once, completely dispelling doubts about profitability that had been raised since the second half of last year. Annual profits are expected to be around 85 billion KRW, but this does not yet reflect the potential success of Baby Monster, so both earnings and valuation could be revised upward depending on performance."

Expectations for the debut of new artist Baby Monster also positively influenced the stock price. YG Entertainment finalized the seven members of Baby Monster's debut group on the day. Jisoo Jung, a researcher at Meritz Securities, analyzed, "Despite being pre-debut, the simultaneous number of viewers reached about 500,000, showing high interest, and an official debut is likely at the end of the third quarter or early fourth quarter of this year."

As a result, securities firms have consecutively raised their target prices for YG Entertainment. Hana Securities raised its target price from 72,000 KRW to 91,000 KRW, Meritz Securities increased it by 18% from 72,000 KRW to 85,000 KRW, and Kyobo Securities raised it by 28.6% to 90,000 KRW.

The global fanbase for K-pop is further expanding, supporting the price strength of entertainment stocks. Jongmin Kim, a researcher at Samsung Securities, said, "There have already been eight songs that entered the Billboard Hot 100 this year. With BTS's absence, global fandom is spreading to various K-pop artists, ushering in a golden age for the entertainment sector."