K-Culture: Growing as a Long-Term Trend
K-POP, Food, and Beauty
The "K-Culture" Active ETF
This year, the number of foreign tourists visiting Korea surpassed the 2019 pre-pandemic record of 17.5 million. The Ministry of Culture, Sports and Tourism has set a target of 20 million visitors for next year and expressed a strong commitment to early achievement of its goal to attract 30 million tourists by 2030. This confidence stems from the global expansion of K-Culture, spearheaded by K-Pop.
At the top of the U.S. Billboard 200, alongside established world stars like BTS and BLACKPINK, newer groups such as Stray Kids and Katseye are making their mark. Stray Kids, under JYP Entertainment, has even reached number one on the Billboard 200. Katseye is a multinational girl group formed by HYBE through local auditions in the United States. The success of Katseye signifies that K-Pop has transcended being a temporary fad and is now blending into local markets as a compelling, mainstream trend.
Export figures for "K-Ramen" exceeded 2 trillion KRW between January and November of this year. This figure excludes the "Hangang Ramen" (instant noodles consumed at the Han River) popular among tourists. KT&G is also preparing for the "K-Tobacco" era by operating new plants in Kazakhstan and Indonesia and acquiring ASF, a Northern European nicotine pouch company.
In the cosmetics sector, it is noteworthy that South Korea—not France—now holds the largest share of the U.S. import market. Initially penetrating through online channels, Korean cosmetics are demonstrating further growth potential by expanding their presence into offline retail. News of "Yepoda" (meaning "pretty" in Korean), a K-Beauty distribution company started in Germany, expanding to 157 stores across Europe suggests that K-Culture is forming a long-term global trend.
Last month, Samsung Active Asset Management listed the "KoAct Global K-Culture Value Chain" Exchange-Traded Fund (ETF). Its portfolio consists of content companies spanning K-Pop, Food, and Beauty, as well as U.S.-listed distributors of K-Culture. The fund also includes Netflix, which distributes K-Dramas, and Sony Group, the parent company of Sony Pictures, the producer of K-Pop: Demon Hunters.
The "TIMEFOLIO K-Culture Active" ETF, launched in 2021 by Timefolio Asset Management, is composed exclusively of domestic Korean stocks. A common feature of both funds is that they are "Active ETFs," leveraging the expertise of fund managers. Due to differences in target countries and underlying indices, the overlap between the two funds' holdings is only about 30%.
The market capitalization of the constituent stocks in K-Culture ETFs currently accounts for 2.54% of the KOSPI. It is worth recalling that the pharmaceutical sector's weight in the KOSPI grew from less than 1% in the 2000s to over 5% today. Experts predict that the weight of K-Culture, now established as a global trend, will continue to increase. This shift is likely to play a crucial role in the re-evaluation of the KOSPI index itself.