SK Innovation lures wary foreign investors

SK Innovation is a lonely bright spot in the prolonged volatility of the Korean stock market, a volatility caused largely by the withdrawal of most foreign investors.

The company has been luring unprecedented foreign and institutional investment and posted a record-high share price on Oct. 2, at 227,000 won ($200). The company says the reasons are its effort to diversify its business structure and the increased margins because of rising world oil prices.

Institutional investors have been particularly active in the oil refinery arm of SK Group, the country’s third-largest conglomerate. Except for two trading days, between Sept. 3 and Oct. 2 institutional investors have been net purchasing SK Innovation shares and the net buying totaled 689,663 shares.

The stock price of the country’s No. 1 oil refinery shot up 15.9 percent over the one-month period. The closing price on Oct. 5 was 224,000 won, slightly off the high.

Foreign investors have been returning to the company’s stock also. The allowable limit of the company’s stock that foreign investors can own was only 30-percent filled on Sept. 11, but in 11 more trading days that figure recovered to 40 percent. In Korea, each listed company has limits on the number of shares foreigners can purchase.

Global oil prices are at their highest levels since late 2014, which has propelled margins at the country’s four oil refineries, SK Innovation, S Oil, GS Caltex and Hyundai Oil Bank. Goldman Sachs predicted in a note on Friday that global oil markets will see a modest surplus into early next year.

Expectations are high that SK Innovation will announce an earnings surprise for the third quarter. FnGuide, a stock information provider, says the analysts’ consensus on the firm’s third-quarter operating profit has been adjusted up by 0.6 percent to 677.6 billion won since the end of August.

“The refining margins that hit bottom in June have gotten out of the worst of it and international oil prices will continue a rising momentum, influenced by the United States’ sanctions on Iranian oil exports,” said Hwang Sung-hyun, an analyst at Eugene Investment and Securities.

That brokerage on Oct. 1 raised SK Innovation’s target share prices by 10.2 percent to 270,000 won.

The SK subsidiary’s future plans center around battery manufacturing in addition to its refinery business. That is expected to boost the share price further. The company announced on Sunday that it would spend 400 billion won to build a plant for key parts of electric vehicle batteries in Changzhou, China, with operations set to begin in the second half of 2020. A separate plan to establish another battery factory in the United States is being considered. Several locations there are currently being reviewed, the company said.

BY SEO JI-EUN [seo.jieun@joongang.co.kr]