May 26, 2019
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K-Pop stocks can still hit the high notes for investors

 South Korean boy band 'iKON' perform on stage during the PyeongChang 2018 Olympic and Paralympic Winter Games 1st Anniversary Festival K-pop Concert at Gangneung Ice Arena in Gangwon-do, South Korea, Feb. 9, 2019. EPA-EFE/KIM HEE-CHUL

South Korean boy band 'iKON' perform on stage during the PyeongChang 2018 Olympic and Paralympic Winter Games 1st Anniversary Festival K-pop Concert at Gangneung Ice Arena in Gangwon-do, South Korea, Feb. 9, 2019. EPA-EFE/KIM HEE-CHUL

Seoul, Mar 13 (efe-epa).- K-pop stocks have struck a bum note this week, according to a Dow Jones Newswires report made available to EFE on Wednesday.

Still, investors should keep them in mind, as the country's cultural output builds global popularity.

Companies involved in producing and selling Korean pop music have plunged since Lee Seung-hyun, a major star and member of the group Big Bang, was charged with involvement in a prostitution ring over the weekend.

Two stocks - SM Entertainment and YG Entertainment - are down by more than 13 percent this week.

For investors brave enough to look past this brewing scandal, the sudden slump could offer a good time to get into these K-pop powerhouses.

The three largest K-pop stocks, which also comprise JYP Entertainment, have doubled their combined sales since 2015, reaching over 1 trillion Korean won ($884 million) last year.

The companies, now each worth between 600 billion and 1 trillion won, occupy dominant market positions compared with record labels in the West.

They typically recruit and train youngsters to form bands in a manner akin to building Olympic gymnasts, hold TV talent contests and send groups on meticulously planned - and lucrative - international tours.

The sector's major players should continue growing healthily, assuming South Korean pop culture - known at home as Hallyu, or Korean wave - can achieve elsewhere even a fraction of the popularity it has in East Asia.

K-pop giant BTS became the first Korean band to top United States album-sales charts, in May last year.

South Korea's government has long supported efforts to make K-pop a major international export.

The second benefit K-pop stocks offer overseas investors keen on South Korea is access to favorable consumer trends unclouded by global trade tensions.

South Korea's main stock benchmark, the Kospi, is heavily tilted toward technology and manufacturing companies exposed to the recent slump in the country's goods exports.

K-pop stocks offer an opportunity to diversify, Dow Jones added in a report made available to EFE.

For sure, stocks that depend on the behavior of 20-somethings living in the public eye can be volatile. Musical fads are fickle, too. Popularity in China - a huge market - is subject to Beijing's shifting moral compass, as that country's video-game developers discovered last year.

To date, though, K-pop stocks have proven a decent long-term bet.

A market-weighted portfolio of the three main companies would have offered returns some 86 percentage points better than the Kospi since the beginning of 2012, shortly after YG Entertainment listed.

Investors looking for a new tune in Asia should take another look.

By Mike Bird

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