K-Pop Shares Become Victim of China-Korea Missile Spat

  • Entertainment stocks down amid China regulation speculation
  • Plan to deploy Thaad defense system has worsened relations

K-pop stars and actors could be the latest victims of South Korea’s missile-shield spat with China as the nation’s entertainment shares fall on speculation its bigger neighbor will restrict access to its media content.

SM Entertainment Co., known for groups such as ‘Girls’ Generation’, closed down 5.3 percent, while YG Entertainment Corp., home to Psy of ‘Gangnam Style’ fame, fell 8 percent. The shares dropped amid speculation China will regulate South Korean content as relations worsen due to a plan to deploy the Terminal High-Altitude Area Defense, or Thaad, anti-missile system with the U.S., said Lim Min Kyu, a Seoul-based analyst at Hyundai Securities Co.

“Although it isn’t confirmed, there seems to be uncertainty among investors,” said Hyun Choi, the head of equities at Baring Asset Management Korea Ltd. in Seoul. “South Korean entertainment companies are mostly relying on businesses in China, and if they can’t do a large-scale concert or show, it would be a problem for them.”

The so-called Korean Wave of popular culture that spans drama, pop music, fashion and cosmetics is an increasingly important part of an economy that generates around half of its gross domestic product from exports. The country’s consumer shares have already been hurt by deteriorating relations over Thaad amid speculation the flow of Chinese tourists to Seoul department stores will be affected.

Regulation Report

China’s State Administration of Press, Publication, Radio, Film and Television is inclined to limit South Korean artists in conducting entertainment activities in China, according to a report Monday on news portal Sina.com that cited unidentified industry sources. The watchdog won’t ban South Korean artists but will regulate them, according to the report.

The U.S. is harming the security and strategic interests of China and Russia using the “security threat” as an excuse, according to a front-page commentary in the People’s Daily overseas edition on Tuesday.

Other entertainment stocks that fell on Tuesday included Showbox Corp., which has a contract with Beijing-based Huayi Brothers Media Corp. to co-produce six films over three years, with a decline of 4.4 percent. CJ E&M Corp., owner of cable channel of tvN, lost 6.9 percent and CJ CGV Co., a cinema operator that has screens in China, fell 5.1 percent. The Kospi gauge dropped 0.5 percent.

Even if China regulates Korean content, movies jointly produced with Chinese companies probably won’t be affected as they’re considered local content, said Hyundai’s Lim.

(Corrects spelling of Terminal High-Altitude Area Defense in second paragrah.)
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