South Korea’s K-pop industry is booming, but investors in its stocks can easily get burned.
Thanks to now world-famous acts like BTS and Blackpink, the industry is worth about US$5 billion, according to analysts, and is continuing to grow as more people around the world tune in. That’s pushed up the stocks of K-pop stars’ agencies and transformed moguls like Hybe Co’s Bang Si-Hyuk into billionaires.
Still, the industry is highly dependent on the actions of a few key players, and negative news about its stars can wipe out millions in market value.
Consider what happened a few weeks ago: Reports emerged that one of the biggest Korean pop stars had a boyfriend, and the stock price of her agency plunged.
The news about singer Karina from the group Aespa ignited outrage among her fans, some of whom even sent a truck with an electronic billboard that said “Do you not get enough love from your fans?” to her agency SM Entertainment Co. Its shares fell 11% in South Korea, and Karina, who’s real name is Yu Ji-min, issued an apology.
Although the stock has since recovered, the episode illustrates the perils of the industry, both for its stars and for investors.
So, should you turn your love of K-pop into an investment? Here’s what you need to know:
What’s the case for investing in K-pop?
It has a huge global fan base, which Bokyung Suh, senior analyst at Sanford C. Bernstein, estimates at about 500 million people. That’s continuing to grow as more music lovers discover the genre. He estimates the industry will have a 12% compound annual growth rate until 2030.
Surging demand for concerts alongside rising ticket prices should boost profits for the companies behind K-pop acts, said Lars Ognarsson, head of research at Jakota Index Portfolios. He’s also optimistic because of increased album sales as well as the continued overseas expansion.
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“Digital streaming for K-pop is soaring, including a significant increase in the number of streams within English-speaking markets,” he said.
Plus, Hybe is expanding its presence in the global music scene through mergers and acquisitions, he noted. In November, the company acquired its first Latin music company, following its purchase of US-based QC Media Holdings.
What are my options?
First, the key players: there are four big companies behind most of K-pop’s stars — Hybe, SM Entertainment, JYP Entertainment Corp and YG Entertainment Inc.
Hybe is known for the boy band BTS, also called the Bangtan Boys, which arguably turned the K-pop industry as a whole into a global phenomenon. SM is behind Karina’s Aespa along with Super Junior and Girls’ Generation, among others. Artists under JYP include Stray Kids, Boy Story and 2PM, while YG is known for Blackpink and BigBang.
They’re all listed on the Korea Exchange, which can be difficult for foreign investors to access, although the country’s regulators are working to make it easier.
For US investors, there’s the Jakota K-Pop and Korean Entertainment ETF (KPOP), which invests in companies that will benefit from the industry’s growth. Its largest holdings are internet services firms Kakao Corp. and Naver Corp. along with SM and Hybe. The fund’s price has fallen almost 15% so far this year.
In Hong Kong, an option is the newly launched Global X K-Pop and Culture ETF (3158 HK), which counts Hybe and media production company CJ ENM Co. as its biggest positions.
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What are the risks?
One of the biggest headwinds for the industry in recent years was news that BTS would take a pause to focus on individual projects, which sent Hybe plunging 28% and wiped out as much as US$1.7 billion in market value. Under South Korea law, able-bodied men are required to complete 18 to 21 months of military service, and two of the BTS members began their duties in December.
Although the stock has since recovered, the episode was indicative of BTS’s influence on the K-pop world.
In general, the shares are notoriously volatile, which is especially dangerous for those who aren’t investing for the long term. Consider Hybe’s share price: In 2023 alone, it rose 77% in the first six months of the year, then fell 38% through mid-November, before rallying another 23% to close the year.
Much of the volatility comes from how fervently K-pop fans and the country’s retail investors follow the industry. That means news events can easily trigger big prices moves, Suh said.
For example, anything from a single group’s contract renewal to rumors of drug use to a star debuting a new relationship can result in gains or losses for the entire sector. K-pop artists are intensely scrutinized by both fans and their management companies. Some reports allege that many singers have a “no dating” clause in their contracts to make them more appealing to fans, and stars such as members of the group Great Guys have spoken out about restrictive diets and forced gym routines.
