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Investors Bet on Samsung’s Fundamentals Though Special Prosecution Has Samsung in Cross Hairs
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Investors Bet on Samsung’s Fundamentals Though Special Prosecution Has Samsung in Cross Hairs
  • By Michael Herh
  • December 22, 2016, 03:00
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Seoul bourse bet on the fundamentals of the company rather than being affected by the special investigation by the National Assembly as seen in stock price changes.
Seoul bourse bet on the fundamentals of the company rather than being affected by the special investigation by the National Assembly as seen in stock price changes.

 

On December 21, the stock market chose Samsung Electronics and Samsung C&T, two cores of the Samsung Group’s corporate governance despite the aftermaths of a search and seizure by the special investigation team that had the Samsung Group in crosshairs. Samsung Electronics declined only slightly in the aftermath of the search and seizure and Samsung C&T Corp., which had recently plummeted, climbed nearly 4% as institutional investors and foreigners increased their purchases of the stocks at a low price. It is said that investors focused on the company's fundamentals, such as shareholder-friendly policies and earnings, rather than non-economic variables.

Samsung Electronics fell 0.39% (7,000 won) to close at 1,850,000 won in the stock market on the day. Samsung Electronics, meanwhile, peaked at 18.3 million won but slid as some people began to sell them to take profits. Samsung C&T, which is expected to improve 4Q earnings, recovered 3.92% (5,000 won) to 132,500 won, returning to the 130,000 won level in a month. It was expected that the stock prices of those companies would fluctuate as on its inauguration, the special prosecution team picked out National Pension Service as the first target to search but the stock market responded calmly. 

In order to look into suspicions surrounding National Pension Service’s decision in favor of the merger of Samsung C&T and Cheil Industries last year, the special prosecution team searched relevant organizations such as the Fund Management Division of National Pension Service and the Ministry of Health and Welfare. It is said that the special investigator is looking into Samsung’s bribes to a third-party (Choi Soon-sil), compensations for National Pension Service’s vote for the merger of Samsung C&T and Cheil Industries and an allegation that National Pension Service committed a breach of trust to aid in the merger.

However, the stock market once bet on the fundamentals of the company rather than being affected by the special investigation as seen in stock price changes. In addition to the restructuring of the company’s corporate governance structure, the two companies are becoming more attractive investment targets as expectations for its 4Q earnings rise. Korea Investment & Securities forecasted in a report that Samsung Electronics's 4th-quarter operating profit will amount to 8.4 trillion won. Its target price was raised from 1.5 million won to 2.2 million won. The investment company also said that a recent drop in the stock price of Samsung Electronics was ignited by supply-demand conditions such as short selling. “The current stock price of Samsung Electronics is staying at the bottom level and in a super-good range that may not happen again,” Korea Investment & Securities added.