NPS’s Big Smile
The National Pension Service (NPS) is having a big smile with the surge in Samsung Electronics' stock prices. The stock price of Samsung Electronics rapidly increased by more than 40 percent this year, the NPS, which has a 8.82 percent share in Samsung Electronics as of the third quarter, racked up over 6 trillion won (US$4.97 billion) in Samsung Electronics alone this year.
Although politicians claim that the NPS caused a loss to the retirement savings of the people with the approval of the merger between Samsung C&T and Cheil Industries, it made profits of more than 10 times larger than the loss caused by the merger by investing in Samsung Electronics.
Stock market experts said that Samsung Group’s success in protecting the control of Samsung C&T Corp., the group's de facto holding company, from U.S. hedge fund Elliott Associates stabilized the management rights of Samsung Electronics, and the NPS was able to post a profit of trillions of won in Samsung Group as a result.
According to business and securities industry sources on December 27, the NPS’ price-earnings ratio in the domestic stock sector and total investment earnings rate this year stood at 6.2 percent and 5.9 trillion won (US$4.89 billion), respectively, as of the 22nd. Most of the profits came from Samsung Electronics. Samsung Electronics saw its stock price increase as much as 42.7 percent to 1.8 million won (US$1,490) as of the closing price on the 26th from 1.26 million won (US$1,044) at the end of last year. Accordingly, the NPS’ value of its Samsung Electronics’ stocks skyrocketed by 6.5 trillion won (US$5.39 billion).
Samsung C&T, whose stock prices decreased after the merger, also showed a relatively high rate of return compared to the average in the construction industry. The stock price of Samsung C&T stood at 159,294 won (US$132) on May 22, 2015, the last trading date before the merger announcement, and it closed at 126,500 won (US$105) on the 26th, a year and a half after, down 20.58 percent. However, the decrease was lower than the benchmark in the construction industry. The figure of the overall construction industry plunged by a whopping 25.47 percent from 149.06 to 111.1 during the same period.
Market watchers say that the situation of Samsung C&T would have worsened and its stock price would have fallen further than the average drop in the construction industry if the company failed to merge with Cheil Industries. Samsung C&T’s construction division settled accounts in 2015 after the merger by reflecting a potential loss of 2.6 trillion won (US$2.15 billion), such as expected loss from projects at home and abroad, inducing Australia’s Roy Hill, contingent liabilities and decrease in asset value. This is why some say that the existing value of Cheil Industries prevented a loss of the former Samsung C&T.