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[THAAD] Korea’s top entertainment firms lose stock value on THAAD

[THE INVESTOR] Local entertainment agency stocks fell to record-lows in the wake of a standoff between South Korea and China over the planned deployment of Terminal High Altitude Area Defense system.

SM Entertainment’s share price fell 5.32 percent to a 52-week-low of 28,150 won (US$25.10) on Aug.5. Another major agency, YG Entertainment, saw its share price close 4.59 percent lower at 32,250 won, another 52-week-low. 

SM Entertainment's idol group EXO. SM Entertainment
SM Entertainment's idol group EXO. SM Entertainment


Industry experts say China’s “cultural retribution” regarding the THAAD deployment is taking a toll on these firms.

“A significant part of growth for these entertainment agencies come from China, so any movement from China to bar or restrict the inflow of hallyu content could be a blow for these companies, and these concerns are right now being reflected in the share prices,” said Kim Hyun-seok, an analyst with Shinhan Investment.

Following Seoul’s July 8 decision to deploy THAAD, China has been gradually upping the ante in its opposition.

Politically, it has been outspoken in its criticism -- aimed at both the US and South Korea -- while economically, it has been cutting ties with the Korean entertainment industry.

Korean performers were abruptly dismissed from shows, while concerts and TV broadcasts were canceled. In some cases, entertainers were not even issued visas.

“We could feel that we would soon be up against some obstacles in hallyu exports to China,” said Kim Jae-hong, vice chairman of the Korea Communications Commission after a recent trip to the country.

Both SM and YG nurture performers, many of whom have been gaining popularity in China, a major market for hallyu celebrities.

In 2015, hallyu content exports were estimated to be worth over 3 trillion won.

For SM Entertainment, its Chinese business accounts for around 35 percent of its total revenue.

YG Entertainment has also recently been expanding into China, having received 100 billion won investment from two major Chinese firms including Tencent.

By Kim Ji-hyun (jemmie@heraldcorp.com)

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