Art & Culture

Korea builds on next wave of Hallyu

South Korean singer Psy
Getty Images

As the Korean wave, or Hallyu, continues to sweep across the world, lucrative foreign investments from France to China could spark the next rush for the country's pop culture, analysts say.

Luxury goods maker LVMH is the latest company to bet on South Korea's "cool" – its private equity arm unveiled plans last week to invest up to $80 million in YG Entertainment, who manages K-Pop stars including superstar rapper Psy.

The investment is the largest by a global fund and will help accelerate YG's move into fashion. The firm, one of Korea's top talent agencies, aims to launch a clothing label with Samsung Group and to enter the cosmetic business with China's Huanya Group.

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YG shares have surged 25 percent since LVMH's interest first emerged earlier this month, bringing the firm's market capitalization to $730 million and underscoring the power of Hallyu in corporate Korea.

"Right across the board, with consumer and cultural products [in South Korea] there is a huge outward wave of interest coming from the outside, which is turning into money," said Tony Michell, managing director at Korea Associates Business Consultancy.

"From an advertising point of view K-Pop stars in Southeast Asia have become hot property, and we think it gives a kind of PR effect to Korea, as behind that comes everything related to Korean fashion and that goes from cosmetics and other things positioned in the dramas or associated with Korea," he added.

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Korea's "cool" factor reached fever pitch in 2012 when pop sensation Psy released the mega-hit 'Gangnam Style,' a catchy rap song with horse dance moves that became a worldwide hit. The video has garnered over 2 billion views to date online, making Psy the most famous K-Pop singer globally and raising the genre's profile.

Since then, there has been renewed interest in all other aspects of Korean culture, spanning music, TV shows, video games, fast food and consumer products.

Some experts are tipping the start of the next wave of Hallyu, this time driven by China. According to CLSA, China's Tencent's decision in March to invest half a billion dollars in CJ Games, a unit of Korean media firm CJ E&M, is a big deal for the firm and a ringing endorsement for K-culture.

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The investment gives China's largest online-games and social-networking company a 28 percent stake in CJ Games, one the most successful game developers in Korea.

"Hallyu will continue to gain momentum and CJ E&M is at the forefront of this wave," Seungjoo Ro, an analyst at CLSA, said in a report this week. "Demand is high in China and will unlock much awaited earnings expansion for CJ's media and films."

Strong government support

CLSA says the Korean craze looks sustainable for now, thanks to the strong support from the government, which has invested billions in the K-Pop phenomenon, including launching a $1 billion investment fund to support the pop industry in 2005.

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The country last year raked in $5 billion from its pop-culture exports, and the government aims to double this figure by 2017. Meanwhile, inbound tourist arrivals jumped 8.3 percent on year to a record 12.2 million visitors in 2013, statistics from the Korea Tourism Organization (KTO) show.

"Currently, the government's budget for culture/media is around 5.3 trillion won ($5.2 billion), or about 1.4 percent of government spending. The goal is to increase this budget to 7.8 trillion won by 2017, or 2 percent of the government's budget," Ro said.

"This will make Korea the second highest cultural spender behind France," he added.