Entertainment Stocks Lose Billions Of Dollars, Concerns About World Tour Disruption Arise

Amid the K-entertainment stock market shaking due to the war between the U.S., Israel, and Iran, the combined market capitalization of the four major entertainment companies has evaporated by more than ₩3 trillion krw (about $2.03 billion USD). Although there are concerns that world tours may be partly affected, the industry says it is still too early to make a judgment and expects little impact on world tour schedules.

According to the Korea Exchange on the 4th, the stock prices of major domestic entertainment companies HYBE, YG Entertainment, JYP Entertainment, and SM Entertainment fell an average of 16% compared to the closing price on the 27th of last month. SM Entertainment saw the largest drop with a 17.0% decline. HYBE’s stock fell 7.23% on the first trading day after the war broke out on the 3rd and plunged an additional 9.04% on the 4th. As a result, the combined market capitalization of the four major entertainment companies shrank by ₩3.6814 trillion KRW (about $2.50 billion USD). HYBE decreased by ₩2.6038 trillion KRW (about $1.77 billion USD), SM by ₩449 billion KRW (about $303 million USD), YG by ₩213 billion KRW (about $144 million USD), and JYP by ₩416 billion KRW (about $281 million USD).

The main cause of the stock plunge is presumed to be the outbreak of the war between the U.S., Israel, and Iran on the 28th of last month. It is analyzed that this has stirred anxiety among domestic individual and institutional investors. Pessimistic views also suggest that economic deterioration caused by the war could dampen consumer sentiment, potentially affecting corporate earnings.

Critic Kim Heon Sik stated, “The entertainment industry tends to contract much earlier than other industries. The economic downturn is likely to shrink the performance industry as well. Expectations for the lifting of the THAAD ban are also likely to disappear.”

There are concerns that the war’s aftermath may seriously disrupt the world tour schedules, the key revenue source for K-pop agencies. In fact, on shareholder discussion boards, there have been expressions of anxiety such as, “Are world tours being canceled because air routes are blocked due to the war?” “Who would invest in entertainment stocks during wartime?” and “If the war drags on, performances can’t happen.”

Industry insiders have a different view. One entertainment insider said, “General investors who are not K-pop fans or insiders are more anxious because they don’t know how world tours are progressing,” and added, “The Middle East isn’t a frequent stop for performances anyway. Even if attempted, it would be just one or two cities, so unless the war spreads to the U.S. mainland, the impact is expected to be minimal.”

Another entertainment insider called it “premature worry” and “a numerical blind spot.” He said, “Since the war has only just started a few days ago, it’s necessary to watch the developments,” but also added, “The entertainment industry is a software industry without physical factories, so we believe earnings won’t be damaged by the war.”

Foreign investors’ views on the K-pop market are similar. On the 3rd, as the number of K-entertainment shares held by foreigners increased, the foreign shareholding ratios of all four major entertainment companies rose. This means they are viewing the current adjustment as an opportunity for bargain buying.