Growth of SKT, KT shares hinges on foreign investor quota

By Kim Bo-eun

SK Telecom's corporate logo

The prices of telecom shares have risen in the past several months due to a renewed interest in value stocks amid a looming rate hike by the U.S. Federal Reserve. But a further rise in the prices of such shares will depend on foreign investors, who wield considerable influence on the prices of local stocks due to their buying power.

Leading telecom firms have a quota limiting the percentage of stocks foreign investors can own. The ceiling is capped at 49 percent. The regulation is intended to prevent foreign investors from gaining management control over businesses in key industries and companies offering public services.

Foreign investors net purchased SK Telecom (SKT) and KT stocks in bulk this year, which pushed up their share prices and the percentage of stocks held by foreign investors in each company.

Foreign investors bought 4.45 trillion won worth of SKT stocks this year. SKT's stock closed at 330,000 won, Tuesday, up by about 40 percent compared to the end of 2020.

This has brought foreign stock ownership near the 49 percent limit. The amount of stocks foreign investors currently hold stood at about 92.95 percent of the authorized quota as of Tuesday.

KT's corporate logo

Foreign investors also hold a large percentage of KT stocks. Foreigners net purchased 1.017 trillion won worth of KT shares this year, which has buoyed the stock price to 32,750 won as of Tuesday's close, up from 24,200 won of the end of 2020, according to the Korea Exchange (KRX).

The amount of stocks foreign investors currently hold stands at about 89.5 percent of the authorized quota as of Tuesday.

Therefore, the Ministry of Science and ICT in February proposed revisions to related regulations that would increase the quota to enable investments that do not bolster management rights by foreigners.

There is no apparent opposition to easing the quota, but it is still unclear when the revisions will be passed. It appears difficult for the revisions to go into effect within this year, given that they need to be passed by a National Assembly subcommittee and during a plenary session, while going into effect six months after President Moon Jae-in declares the enactment of the law.

As another means to boost its stock price, SKT stated last week that it will conduct a 5-to-1 stock split later this year. A stock split brings down the price of a stock, which facilitates the entry of new investors.

“Easing the quota would have the effect of boosting corporate value,” an industry official said.