Rush is on to buy Samsung stocks

Despite Samsung Group owner’s health scare, stocks of major Samsung Group affiliates remained bullish yesterday.

Samsung Electronics’ shares finished 3.97 percent higher yesterday from the previous trading day, at 1.33 million won ($1,354).

The company’s shares fell slightly in the early morning session, but with strong foreign buying they were soon on the rise and led the Kospi index gain of 8.39 percent.

The local benchmark index was steady when the market opened, but began posting growth in the afternoon as Samsung Electronics gained more than 4 percent throughout the day. Morgan Stanley, JP Morgan and UBS were the main buyers of Samsung Electronics’ shares late in the day.

Samsung Electronics Chairman Lee Kun-hee has been in the hospital receiving emergency treatment for acute myocardial infarction since Saturday night.

Shares of Samsung affiliates directly related to the group’s upper management were also gaining momentum as shifts in control at those companies were expected to speed up as the chairman’s health deteriorates.

Samsung Life Insurance surged 4.04 percent. Hotel Shilla, headed by the eldest daughter of Chairman Lee Boo-jin, finished 2.69 percent higher and Cheil Worldwide, led by the second-eldest daughter Lee Seo-hyun, jumped 3.93 percent.

Samsung C&T, which is expected to benefit the most from governance reform as it is Samsung Group’s equity storehouse, gained 2.71 percent to finish at 68,300 won.

“As Chairman Lee’s health conditions worsened, there are widespread expectations that Samsung will rush its management succession or disposal of shares, and this is becoming a factor in raising stock prices,” said Lee Sang-heon, an analyst at Hi Investment and Securities. “Samsung Electronics and Samsung C&T can become beneficiaries of the governance reform, thus shareholders and investors purchased more shares in order to raise their stock value.”

Samsung C&T holds 4.06 percent of Samsung Electronics’ stocks and Samsung Life Insurance possesses 7.56 percent of the electronics company’s stocks and is the largest shareholders among affiliates.

Shares of KCC soared 8.6 percent yesterday, since KCC is 25.1 percent owned by Jay. Y Lee, the chairman’s son and heir-apparent, who is the second-largest shareholder of Samsung Everland and has 17 percent of Everland’s shares.

There are two likely scenarios for reorganization of governance. One is setting up Samsung Everland as the holding company and under Samsung Everland, dividing the affiliates into two: One group for manufacturing based on Samsung Electronics and one group under Samsung Life Insurance for the financial division.

Another scenario would separate affiliates into those owned by Lee’s son and those owned by his daughters.

BY KIM JUNG-YOON [kjy@joongang.co.kr]