Solid Entertainment Stocks Despite Increasing Market Volatility

Entertainment Stocks Outperform as KOSPI and KOSDAQ Decline
“K-Pop Demon Hunters Effect” and Hallyu Ban Easing Expectations Drive Gains

While volatility in the domestic stock market is increasing, entertainment stocks are continuing their solid upward trend. This is attributed to strong second-quarter earnings and expectations surrounding the lifting of China's Hallyu ban.

According to the Korea Exchange on August 22, between August 1 and 21, the ETF ACE KPOP recorded a return of 14.26%, while HANARO Fn K-POP&Media rose by 12.28%. Individual stocks also posted high gains. HYBE closed at 291,500 won the previous day, up 12.33% compared to the end of last month. YG Entertainment surged by 26.20%, SM by 12.32%, and JYP Ent by 9.35%. In contrast, during the same period, the KOSPI fell by 3.20% and the KOSDAQ by 3.48%.

The rise in entertainment stocks is believed to be influenced by solid second-quarter results. HYBE posted an operating profit of 65.9 billion won in the second quarter, up 29.4% year-on-year. YG Entertainment also achieved an operating profit of 8.4 billion won, turning a profit compared to the same period last year. Most entertainment stocks reported strong earnings.

Additionally, the impact of the animation "K-Pop Demon Hunters" is being felt. The original soundtrack (OST) of "Kedeheon" has entered the US Billboard chart, and this box office success has served as a positive factor for entertainment stocks. An official from the financial investment industry stated, "The effect of the animation K-Pop Demon Hunters has created positive sentiment for entertainment stocks," adding, "Expectations that people will continue to show strong interest in K-pop are being reflected in these stocks."

Furthermore, expectations for the lifting of the Hallyu ban have also played a role. It has been reported that the girl group Kep1er will hold a fan meeting next month in Fuzhou, Fujian Province, China. In addition, Chinese authorities have announced the opening of overseas program content, including dramas.

Securities firms expect entertainment companies' earnings to continue improving this year. According to FnGuide, securities firms forecast HYBE's third-quarter operating profit at 63.6 billion won, a 17.46% increase year-on-year. SM is expected to post 49.6 billion won, up 271.90%, and YG Entertainment is projected to turn a profit with 29.1 billion won in operating profit.