Samsung Electronics Sell-off by Foreigners... Focused Buying in Telecom Stocks

Samsung Electronics Sold 1.6529 Trillion KRW in the Past Month
KT Bought 131.5 Billion KRW, SKT 80.4 Billion KRW, LGU+ 60.7 Billion KRW Worth

[Asia Economy Reporter Kwon Jae-hee] Amid continued foreign selling of Korean stocks, it has been revealed that foreigners are concentrating their purchases on telecommunications stocks. In contrast, semiconductor leaders Samsung Electronics and SK Hynix continued to see net selling.

According to the Korea Exchange on the 6th, over the past month (March 6 to April 5), foreigners sold Samsung Electronics shares worth 1.6529 trillion KRW. During the same period, SK Hynix was also net sold by 418.1 billion KRW.

The stocks foreigners sold off in semiconductors were replaced by telecommunications stocks. During the same period, foreigners purchased KT shares worth 131.5 billion KRW, SK Telecom 80.4 billion KRW, and LG Uplus 60.7 billion KRW, showing balanced buying across the three major telecom companies.

The reason foreign demand is concentrated in telecom stocks is attributed to shareholder-friendly policies and attractive growth momentum from new businesses such as Over-The-Top (OTT) services and 5th Generation Mobile Communications (5G). Typically, telecom stocks attract attention during inflationary downturns due to their steady cash flow generation, and indeed, all three telecom companies have increased dividends and implemented shareholder-friendly policies. LG Uplus raised its effective dividend payout ratio from 35% to 40%. In particular, KT, the most purchased stock by foreigners, has increased dividends for two consecutive years and has conducted year-end dividends for six years since 2015, demonstrating shareholder-friendly policies. Additionally, KT’s governance restructuring and holding company transition issues have acted as positive factors.

The securing of new growth momentum through OTT and 5G also drove foreign demand. SK Telecom announced plans to invest 1 trillion KRW over five years along with Wave, and KT also revealed a 500 billion KRW investment in Studio Genie.

Kim Hong-sik, a researcher at Hana Financial Investment, analyzed, "The investment attractiveness of telecom service sectors such as KT is very high. Although the possibility of stagflation is emerging, its impact on telecom stocks is minimal. Along with solid earnings and being beneficiaries of regulatory easing by the new government, expectations for stock price increases are growing."