The first exchange-traded fund (ETF) focused on investing in Korea’s four major entertainment companies — SM Entertainment, HYBE, JYP Entertainment and YG Entertainment — made its stock market listing on Tuesday on the country’s main benchmark KOSPI market.
Launched by Korea Investment Management, the ACE KPOP Focus ETF sets itself apart from other ETFs that also invest in the K-pop industry in that the top four major entertainment companies take up about 95 percent of its entire portfolio.
The ETF is based on the underlying iSelect K-POP Focus Index, compiled and announced by NH Investment & Securities. This index includes the top 10 companies in terms of market dominance in the K-pop industry based on annual revenues.
Specifically, SM Entertainment accounts for 25.92 percent of the ETF’s composition as of last Friday, followed by HYBE at 24.90 percent, JYP Entertainment at 23.95 percent and YG Entertainment at 19.34 percent.
The ACE KPOP Focus ETF plans to concentrate its investments on the four major K-pop agencies that have long demonstrated exceptional market growth. The four companies have averaged an annual revenue growth rate of 28 percent over the past eight years since 2016. They also posted an average operating profit margin of 19.13 percent for last year.
The profitability growth of the entertainment industry is expected to continue, as the industry effectively utilizes various platforms, such as performances and music streaming, to expand further into the global market, said Nam Yong-soo, the head of ETF management at Korea Investment Management. He explained that major shareholders of some entertainment companies have been buying back their own shares during the recent stock price correction period.
Nam added that various new groups are slated to debut in the first half of this year, which are expected to draw investors’ interest into the entertainment industry. He stressed that the new ETF will help investors benefit from the growth of the entertainment industry.
