SM, The Only Entertainment Company with Investment Momentum

This indicates that individual investors are choosing covered call products as a refuge to pursue relatively stable returns in an unstable market.

A covered call product involves selling call options to collect premiums while holding the underlying asset. This position is exposed to two risks: first, it cannot track profits when the underlying asset surges, and second, principal loss can occur if the underlying asset plummets. Therefore, contrary to expectations, losses may occur depending on market conditions.

In a market currently stuck in a sideways range, fewer investors buy call options, while more investors sell call options to earn profits. This intensifies competition among option sellers, structurally reducing call option selling premiums and inevitably lowering returns. The common expression 'steady income like a monthly salary' may not hold true in a sideways market.

Target covered call products also see performance vary greatly depending on the operating entity's capabilities, and it is difficult to predict whether that operator will respond well to market conditions. Furthermore, stable ETFs combining semiconductors and bonds do not guarantee absolute stability. If interest rates are currently at their peak, losses could occur in the bond segment, meaning such seemingly stable products inherently carry these risk factors.

Investors should keep in mind that products everyone buys generally lose their appeal. The possibility of achieving high returns of over 15% from covered call products, as in the past, is becoming increasingly low. There is no need to stick to covered call products if the stock market rebounds, and it is time to consider reducing investment weighting in these products at this point.

Expectations that the tightly closed Chinese market may reopen are boosting entertainment stocks across the board. The market's attention is particularly focused on SM, which, backed by a large equity investment from Tencent Music, has established a joint venture in Beijing to actively cultivate local idols. However, due to political tensions between the U.S. and China, it remains uncertain whether the Chinese market will officially open.

The expectation that China will completely lift its Hallyu ban on Korea might be too naive. There is still no official signal for the lifting of the Hallyu ban, and given the U.S.-China relationship and Korea's diplomatic stance, hasty expectations should be avoided. Therefore, it does not mean the Chinese market is fully opening, and among today's stocks, only SM is showing particularly strong movement compared to other entertainment stocks, which can be interpreted as a result of these limited expectations.

SM's approach of initiating revenue activities like Macau fan meetings and merchandise sales from the trainee stage, even before debut, differentiates it from other entertainment companies and creates opportunities for entering the Chinese market. China's massive population can serve as a significant opportunity for SM. Compared to other entertainment companies struggling with junior IP growth, SM has a clear direction, which could lead to performance improvement. However, due to the nature of the Chinese market, there is always a risk of unpredictable setbacks.

These stocks lack critical momentum to escape their low valuations. However, SM has an exclusive momentum due to its entry into the Chinese market, which could serve as a positive catalyst for the entire sector. For now, a positive outlook on entertainment stocks other than SM should be withheld.