K-pop girl group BlackPink performed on The Late Late Show Starring James Corden which aired on Thursday April 18, 2019. (Photo by Terence Patrick/CBS via Getty Images)
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The creator behind the new exchange-traded fund, which aims to convert global fans of Korean content into an investment opportunity, is upbeat in its premise.
Since its launch on Sept. 1, the KPOP and Korean entertainment ETF hasn’t fared well — it recently traded at $15.05 on the New York Stock Exchange’s Arca — down about 23% from its debut. That’s consistent with the overall Kospi index, which has fallen more than 20% this year.
But Jangwon Lee, chief executive of CT Investments and Contents Technologies and creator of the ETF, is hopeful about the Korean entertainment industry despite the sluggish outlook for global markets.
“Consumption of content, particularly digital, has been relatively resilient in recessionary and inflationary environments and over the longer term,” Lee said in an interview with CNBC, adding that there have been “a rough couple of weeks across asset classes” since the fund’s inception .
Shares in Korean entertainment companies have underperformed overall, with YG Entertainment’s share price down about 26% year-to-date and Hybe down more than 64% year-to-date.
“Ultimately, we believe the underlying performance of the companies in our ETF will provide further impetus to attract demand from a broader investor universe,” he said.
We are witnessing a tipping point in K-Pop and K-Content, moving from a subculture that was more of a subculture in the past to gradually reaching mainstream status worldwide.
Yangon Lee
CEO of CT Investments
The KPOP ETF says on its website that it “offers concentrated exposure to Korea Exchange-listed companies involved in the entertainment, interactive media and services industries.” The fund is a 30-stock index that includes entertainment companies that manage bands like BTS, BlackPink and Twice – their respective agencies are HYBE, YG Entertainment and SM Entertainment.
This also includes content makers like Studio Dragon, which produced the hit series Crash Landing on You, and platform companies like AfreecaTV, through which some live stream themselves playing video games and eating.
“We believe it’s still early days as we witness a tipping point in K-pop and K-content gradually reaching mainstream status globally, from a subculture in the past,” he said.
JYP Entertainment’s K-pop girl group Twice at Yes24 Live Hall on April 22, 2019 in Seoul, South Korea. Shares in Korean entertainment companies have generally underperformed.
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pent-up demand
Lee of CT Investments and Contents Technologies said the creative content companies this fund brings to global investors will thrive in the longer term as borders reopen and countries like South Korea and Japan lift quarantine and testing rules for tourists.
“There is significant pent-up demand among existing fans and K-pop artists have deliberately released new albums in time for the reopening,” he said, adding that many artist groups have recently resumed world tours and concerts.
Financial analyst Lee Ki-hoon of Hana Financial Group said the pandemic has proven the genre has benefited from its music business becoming more focused on “visual concepts,” as seen through its social media reach.
“Global fandom is seeing a trickle down effect from groups like BTS and BlackPink since they’ve been direct beneficiaries of YouTube — it’s not limited by time or place,” Lee Ki-hoon said in an October report.
BangtanTV, one of BTS’s YouTube channels, has 71.5 million subscribers, while BlackPink’s channel has 82.7 million subscribers.
BTS performs during the 64th Annual GRAMMY Awards at MGM Grand Garden Arena on April 3, 2022 in Las Vegas, Nevada.
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“Longtime Believer”
Goldman Sachs forecasts global music industry revenues to reach $131 billion by 2030 — more than double 2017’s $62 billion — adding that streaming will push the industry to record highs.
CT’s Jangwon Lee is similarly optimistic, adding that he “believes in the long-term prospects of K-pop across the industry.”
“K-pop fan engagement around the world is significantly higher than other genres in terms of metrics like social media engagement and merchandise sales, including physical album sales,” Lee said.
“We think there could be high conversion among fans becoming shareholders in companies their favorite artists are affiliated with,” he said.
On short notice, Hana Financial Group’s Lee said Hybe, the group behind BTS, could hit rock bottom sometime in December when the group’s plans to join the South Korean military are finalized.
CT’s Lee said the agency’s confirmation that the band would move forward with their call-up plans meant clearing up some uncertainties.
“A significant overhang has been eliminated,” Lee said, adding that investors’ focus will now “shift to other growth prospects across the company.”