Entertainment stocks to rally on hopes of improved China ties under Lee administration
President Lee Jae-myung and first lady Kim Hye-kyung visit a traditional market in Seoul’s Dongjak District, Friday. Courtesy of presidential office
Hopes for improved ties between Korea and China following the launch of the Lee Jae-myung administration are fueling expectations for a further boost in entertainment stocks in the second half of the year, securities analysts said Friday.
The entertainment sector had already drawn attention in the first half of the year, having been labeled a "tariff-free zone" for its resilience despite tariff risks posed by U.S. President Donald Trump.
Hwang Ji-won, a senior analyst at iM Securities, noted that the liberal Democratic Party of Korea's rise to power following Lee's election win is prompting expectations of deeper cooperation with China.
"The upcoming Asia-Pacific Economic Cooperation (APEC) Summit, scheduled for late October (in Gyeongju, North Gyeongsang Province), could pave the way for a formal end to the unofficial ban on Korean cultural content that has been in place since 2016," Hwang said. "While Korean content has continued to see strong demand through unofficial channels in China, a policy shift favoring hallyu (the Korean wave) could significantly boost revenues."
Hwang added that Korean entertainment agencies are likely to experience a sharp improvement in earnings with the potential resumption of large-scale concerts, fan events and advertising campaigns in China.
Lee Kyung-min, an analyst at Daishin Securities, also suggested that the new administration may take a more conciliatory approach toward China compared to the previous government.
"Such a shift, coupled with Beijing's efforts to boost domestic consumption, could create favorable conditions for Korea's media and entertainment sectors," the analyst said.
According to the Korea Exchange, shares of Korea's four leading entertainment companies have climbed an average of 56.7 percent this year as of Thursday.
YG Entertainment, listed on the country's secondary Kosdaq market, led the rally with its stock price soaring 90.8 percent from 45,800 won ($34) to 87,400 won.
SM Entertainment followed with a 77.8 percent gain, closing at 134,400 won, while JYP Entertainment saw a more modest increase of 11.2 percent, closing at 77,700 won.
K-pop boy band BTS / Courtesy of HYBE
HYBE, the K-pop powerhouse behind BTS listed on the main KOSPI bourse, recorded a 47.1 percent increase from 193,400 won to 284,500 won.
During the first half of the year, as investors remained cautious about the Trump administration's aggressive tariff policies, entertainment stocks — perceived as immune to tariffs — attracted significant attention.
Although the monthly gains in entertainment shares have recently slowed amid the gradual easing of U.S. tariff concerns, securities companies continue to maintain positive outlooks for the sector.
According to financial data provider Yonhap Infomax, securities firms have raised their average target price for SM Entertainment by 18.7 percent from 131,333 won to 155,867 won over the past month.
YG Entertainment's target price was also increased by 12.7 percent, moving from 80,769 won to surpass 90,000 won, while HYBE's target price saw a 4.3 percent rise from 317,500 won to 331,520 won.