K-pop girl group NewJeans / Courtesy of Ador

The stock prices of four major Korean entertainment companies went into a tailspin, largely triggered by a highly-publicized conflict at HYBE, the management company behind K-pop titan BTS. Market watchers suggest that the ongoing dispute plaguing Korea's largest entertainment company in terms of market capitalization eroded investor confidence in the overall Korean entertainment sector.

According to the Korea Exchange (KRX), the stock prices of four major entertainment companies dropped throughout April.

HYBE shares displayed the biggest drop, plunging 12.17 percent in April. This was followed by YG Entertainment, whose stock price fell 9.9 percent, while SM Entertainment's shares declined 9.6 percent, and JYP Entertainment issues dropped 7.4 percent.

Compared to the prices at the start of this year, the decline has become more pronounced, with all four companies displaying significant drops in their stock prices.

JYP exhibited the weakest performance, with its share price dropping 34.15 percent so far this year, followed by YG, which experienced a loss of 16.6 percent. SM stocks fell 13.8 percent, while HYBE posted a decline of 13.4 percent during the first four months of this year.

Foreign and institutional investors have been leading the selloffs, transitioning to net-selling positions totaling approximately 700 billion won ($507 million) so far this year, reflecting their decreasing optimism over the future earnings and operating profits of the four companies and casting doubt on whether the current growth momentum can be sustained in the foreseeable future.

A noticeable trend is the contrasting behavior of retail, foreign and institutional investors. While foreign and institutional investors were selling off entertainment stocks, retail investors went bargain hunting.

For instance, foreign and institutional investors each net sold 154.5 billion won and 36.6 billion won worth of HYBE stocks, respectively, from April 22 to 26 when the feud between HYBE and its sublabel Ador, the agency managing K-pop group NewJeans, grabbed headlines. This led HYBE's stock price to drop 12.58 percent, shedding more than 1.2 trillion won in market cap in just five trading sessions.

In contrast, retail investors net-purchased 191.7 billion won worth of HYBE stocks during the same period. Retail investors' net purchases of the stocks reflect their strong belief in the fundamental earnings power of the major entertainment companies, despite the current short-term fluctuations in their stock prices.

Also, the slated comebacks of major K-pop artists and rookie groups from the four major entertainment agencies in the near future have buoyed the earnings expectations of retail investors.

“In the worst case scenario of NewJeans being excluded from HYBE's artist line-up, the negative impact on the firm's annual earnings and operating profit is estimated to be less than 10 percent,” Park Su-young, analyst at Hanwha Securities, said, adding the firm's long-term growth outlook is expected to remain intact.

Ji In-hae, an entertainment and media analyst at Shinhan Securities, also said that she maintains a positive outlook on entertainment stocks as she views “the momentum after the second quarter has not changed.”