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In down market, CEOs turn buyers

Internal stock deals reassure, tighten grips

Oct 30,2008
Amid the Seoul stock market’s free fall, the nation’s chief executive officers and top shareholders are buying their own companies’ shares to prove their financial soundness and prevent stock prices from sliding further.

Such a move often reassures retail investors because it tells them share prices have hit bottom. CEOs also buy shares when prices are down to gain a firmer hold over their own corporations.

Hanwha Group Chairman Kim Seung-youn on Tuesday purchased 242,000 shares, or a 3.21 percent stake, in Hanwha, the Hanwha Group’s holding company.

Even though Hanwha Group won the Oct. 24 bid for Daewoo Shipbuilding and Marine Engineering Co., the world’s third-largest shipyard, its share price has been dropping. If the trend continues, outsiders could think the group has liquidity problems.

“In order to show confidence and calm agitated shareholders, we decided to buy some of our shares,” said an official of Hanwha Group who declined to be named.

After Hanwha’s move, share prices of Hanwha Group affiliates rose and Hanwha Non-Life Insurance rose to the daily limit of 15 percent.

On Tuesday, the CEOs from nine other conglomerates also said in regulatory filings that they would increase their respective stakes in their companies.

“In times like this, no one is willing to purchase shares. For this reason, if shares stay in the market, it causes their prices to fall,” said Lee Sun-yeop, a researcher at Goodmorning Shinhan Securities. “Buying their own shares is not a sure-fire way to increase share prices, but it prevents them from diving.”

Buying their own shares is also used to handle rumors. At Kumho Group, which has been said to suffer liquidity problems, top shareholders including Vice Chairman of Kumho Asiana Group Shin Hoon and CEO of Kumho Asiana Group Kang Joo-an bought the group’s shares.

Meanwhile, SKC Chairman Choi Shin-won raised his stake in his company to 3 percent over the past year ending Oct. 22 by purchasing 33,000 shares. To increase their own stakes, the heirs of CEOs have been buying shares of the companies they belong to.


By Choi Hyeon-chul , Lim Mi-jin JoongAng Ilbo [so@joongang.co.kr]



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