Samsung affiliates stocks down over chief's arrest

By Nam Hyun-woo

Stocks of Samsung affiliates dropped Friday, after Samsung Electronics Vice Chairman Lee Jae-yong, was arrested on charges of bribery.

The Seoul Central District Court issued a warrant for Lee over claims that Samsung paid bribes in return for political support on a merger between the electronics giant's construction arm, Samsung C&T, and an affiliate firm, Cheil Industries in 2015.

The arrest came as a shock on 15 affiliates listed on the main KOSPI market and one on the secondary KOSDAQ. The 15 firms’ total market cap accounts for 29 percent of the entire KOSPI market.

Samsung Electronics ended at 1,893,000 won, down 0.42 percent from a day earlier. It made a weak start with the opening of Friday’s session, once dropping to 1,864,000 won, but slowly rebounded in the afternoon.

Samsung C&T shed 1.98 percent to close at 124,000 won, and Samsung SDS also ended at 128,000 won, down 0.78 percent from a session earlier. Samsung Life Insurance and Samsung Card each declined 1.4 percent and 1.67 percent from a day earlier.

With the major caps’ plunge, KOSPI ended at 2,080.58, down 1.26 points or 0.06 percent from the session earlier.

Meanwhile, Hotel Shilla and preferred shares of the hotel were rising. The hotel’s stocks had risen last month when Vice Chairman Lee managed to avoid being arrested.

Observers explained that the shares shot up amid expectations that Lee’s sister, Boo-jin, who is president of Hotel Shilla, will take a bigger role in leading Samsung amid the leadership vacuum. Samsung refuted this as “groundless,” adding that “Lee’s arrest does not bring a fundamental change in Samsung’s leadership.”

Analysts also said that Lee’s arrest will not bring a fundamental change in Samsung stocks’ recent upward movements.

“Samsung Electronics has been showing sound outcomes recently and its fundamentals are solid,” said Hana Financial Investment analyst Kim Yong-goo. “A CEO arrest will not harm the company’s stock price significantly.”

He cited previous cases in which arrests of heads at other conglomerates did not shake stock prices. Rather, he noted that investors should pay more attention on the mid- to long-term issues pending on Samsung, such as Samsung Electronics’ transformation into a holding firm, because they could be affected by the CEO’s absence.