A Pop in Major K-Pop Stocks Driven by Potential Easing of Korean Contents Restrictions by China

• The major K-Pop stocks had the biggest up day so far this year on 23 May, driven by potential easing of Korean cultural contents restrictions by the Chinese government.

• In the past nine years, there has been a ban on Korean singers' performances in China.

• Among the major K-Pop stocks, we continue to have a Positive View on S.M.Entertainment Co (041510 KS) but bearish on HYBE (352820 KS) and YG Entertainment (122870 KS).

The major K-Pop stocks including HYBE (352820 KS), Jyp Entertainment (035900 KS), and S.M.Entertainment Co (041510 KS) had the biggest up day so far this year on 23 May, driven by potential easing of Korean content restrictions by the Chinese government. (한한령: Korean Wave Contents Restriction Order). These three stocks rose on average 7.5% on 23 May.

In the past nine years, there has been a ban on Korean singers' performances in China. In other words, there has been no major singer or Korean pop bands that were given any permission for live concerts in China in this period. However, in an unusual move by Beijing, the Chinese government allowed a Korean indie band called 'Say Sue Me' to perform in Beijing in July.

Although the Chinese government has not formally announced that it will end the Korean Wave Contents Restriction Order, the fact that the Chinese government has allowed a Korean indie band to perform in China suggests a potential easing of this restrictive policy. In addition to the upcoming concert by Say Sue Mi in Beijing in July, the famous Korean soprano Sumi Cho performed at the Beijing National Grand Theater Concert Hall this month after nearly 8 years of being blocked by the Chinese government.

In July 2016, the U.S. military decided to deploy THAAD missile system in South Korea and this move heightened the political hostility between China and South Korea, which further agitated the Beijing government to block the Korean Wave contents such as pop music performances from entering China. The last time there was a major Korean K-Pop band performing in China was in 2015 when YG Entertainment's Big Bang band completed an 11 city tour.