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The sector with the highest level of foreign ownership shifted from electronics to telecommunications this month. Foreign investors have begun purchasing shares in KT after selling off their Samsung Electronics stocks.

This significant shift is largely attributed to the combination of the high dividend appeal of telecommunication stocks and their potential inclusion in the Korea Value-up Index.

According to financial information provider Yonhap Infomax, Sunday, the foreign ownership ratio in the telecommunications sector of the country's main bourse, the KOSPI, stood at 42.94 percent, as of Thursday, ranking first among all 21 sectors.

The electronics sector ranked second with 42.47 percent, followed by finance at 37.1 percent, insurance at 36.3 percent, transportation and equipment at 34.35 percent and manufacturing at 33.97 percent.

The paper and wood sector had the lowest level of foreign ownership at just 2.44 percent.

The rise of the telecommunications sector has been particularly notable this month, as its foreign ownership ratio reached 42.92 percent on Nov. 1, surpassing the electronics sector's 42.77 percent for the first time in one year and five months.

Since then, the gap in foreign ownership between the two sectors has steadily widened, reaching 0.58 percentage points on Wednesday and 0.47 percentage points on Thursday.

Visitors enter the KT building in Gwanghwamun, Seoul, as seen in this March 2023 photo. Yonhap

Among telecom operators, KT had the highest level of foreign ownership at 48.96 percent as of Thursday, followed by SK Telecom at 42.39 percent and LG Uplus at 35.36 percent.

KT's foreign ownership has steadily increased from 42 percent at the beginning of the year, approaching the 49 percent cap set by the Telecommunications Business Act.

This marks the first time KT's level of foreign ownership exceeded 48.9 percent since Oct. 8, 2019, when it reached 48.91 percent.

In contrast, the foreign ownership ratio in the electronics sector has been declining since reaching 48 percent on July 18, continuing its downward trend through Thursday.

This decline is largely attributed to the ongoing selling spree by foreign investors in Samsung Electronics, the leading stock in the sector. During that period, the foreign ownership ratio in Samsung Electronics dropped from 56 percent to 51 percent.

The telecommunications sector has also seen a rise in stock prices. From the beginning of the year to last Friday, KT's stock price increased by 29.36 percent, while those of SK Telecom and LG Uplus rose by 14.17 percent and 8.4 percent, respectively.

Typically, in the lead-up to the end of the year, foreign investors target high-dividend stocks such as telecommunications and financial stocks in anticipation of dividend payouts.

This year, the expectation that telecommunications stocks are likely to be newly included in the Korea Value-up Index next month has further fueled the buying momentum in the sector.

“Telecom companies are expected to see healthy profit growth over the next two to three years,” NH Investment & Securities analyst Ahn Jae-min said. “With profit growth and an increase in shareholder returns, a favorable environment for investors has been created.”