Korean entertainment stocks advance, unfazed by US tariff concerns

South Korean entertainment and gaming stocks climbed on Friday, defying a broader market drop as investors sought refuge in sectors seen as immune to US tariffs.

Washington on Wednesday announced sweeping tariff hikes on imports, slapping South Korea with 25% reciprocal duties, primarily targeting the manufacturing sector.

The tariff announcement dragged down shares of semiconductor companies such as Samsung Electronics Co. and SK Hynix Inc., as well as carmakers.

In contrast, shares in SM Entertainment Co., a K-pop pioneer, ended up 4.03% at 108,400 won ($75.3). Music studios and game developers are expected to remain largely unaffected by the trade measures, said analysts.

HYBE Co., the company behind boy band BTS, gained 3.80% to 246,000 won. CJ ENM, the country’s largest drama and movie studio, jumped 2.55% to finish at 60,400 won.

“Entertainment is a taste-driven service sector, so demand tends to remain steady regardless of economic cycles,” said one brokerage company analyst. “Even if trade conflicts escalate, these companies are unlikely to suffer direct hits.”

The share price of Krafton Inc., a leading Korean gaming company, advanced 4.95% to close at 371,000 won. That reversed a 1.27% drop on the Kospi index.

Korean content companies, such as music labels and drama studios, derive a big chunk of their revenue from abroad. While physical albums, game CDs and merchandise could be subject to tariffs, their contribution to overall revenue is relatively low.

Particularly, they generate much of their revenue from digital content such as music downloads and streaming, as well as overseas concerts, riding on the global popularity of K-pop and Korean drama series.

Game developers primarily earn through subscriptions and in-app purchases -- business models centered on intellectual property rather than physical goods. That makes them more resilient to tariff pressures.

A strong dollar further boosts their earnings. Their revenues from abroad are often converted into Korean won, while operating expenses are incurred domestically, creating opportunities for foreign exchange gains.

Last year, 63.8% of HYBE’s total revenue came from overseas markets. Krafton derived 93% of its sales abroad, while DoubleUGames Co. generates almost all of its revenue outside Korea.

Write to Han-Gyeol Seon and Hyun-Ju Yang at always@hankyung.com
 


Yeonhee Kim edited this article.