By Park Hyong-ki
Staff Reporter
Samsung Corp. and other Samsung Group shares plunged Tuesday, hit by allegations that the units cooked their accounting records to raise a slush fund.
The news that Chong Wa Dae will not veto the National Assembly's special audit of the slush fund allegations added downward pressure on the stocks.
Kim Yong-chul, the former legal affairs chief of the Samsung Group, has unveiled a series of allegations involving the conglomerate and told a press conference Monday that the group created a 200 billion won slush fund.
He said that Samsung Corp. and other key units fabricated books to raise the money, which he claimed was used to bribe prosecutors and government officials.
With Samsung stocks accounting for about one tenth of the market capitalization, the series of allegations involving the group weighed down on the broader market, already affected by weak U.S. stocks from credit woes and China's tightening of its monetary policy.
Citing past experience, analysts, however, said that the allegations will not pose a major threat to the stock market in the long-term as the country's sound exports and other industrial figures are expected to promote investor confidence. Also, U.S. retail sales are looking bright toward the yearend holiday season, offsetting housing jitters.
Still, they left open the possibility that the Samsung Group scandal could turn uglier depending on the results of ongoing investigations.
They say variables remain over the group's shares as investigators have yet to uncover the truth behind allegations on the slush fund and accounting fraud.
``Although Samsung Corp.'s construction business looks promising, its shares along with other group shares are going to take another beating should investigators prove their wrongdoing,'' said Kim Ki-young, an analyst of SK Securities.
But Kim said weak Samsung Group shares were unlikely to drag down the broader market going forward.
Analysts also said that politically motivated themes will have no long-lasting negative impact on Samsung shares as seen in the past with other cases involving corporate slush funds.
``Its effect on the market will be short lived,'' said Lee Woo-hyun, an analyst of Kyobo Securities.
Since Samsung shares are considered blue chips, investor sentiment will eventually revive on healthy fundamentals after this fiasco as the market saw with Mirae Asset, he added.
The spread of rumors about Mirae Asset Investments' fund managers buying stocks irregularly pummeled large-cap stocks last Friday, but the market soon rebounded afterwards.
Most Samsung group stocks managed to recover part of earlier steep losses as investors bet their falls were overdone. Samsung Electronics shares closed down 24,000 won, or 4.26 percent, at 539,000 won, Samsung Corp. lost 1,300 won, or 2.05 percent, to 62,000 won and Samsung Heavy Industries fell 200 won, or 0.48 percent, to 40,650 won. Samsung Securities shed 2,600 won, or 2.88 percent, to 87,5000 won.
The key KOSPI index closed up 4.46 points, or 0.24 percent, at 1,859.79, while the tech-heavy Kosdaq climbed 4.14, or 0.57 percent, to 725.55.