After Lee’s arrest, mixed performance in stocks

Most Samsung-related shares fell after the conglomerate’s de facto leader Lee Jae-yong was formally arrested Friday morning on charges of bribery in connection with the political scandal surrounding President Park Geun-hye.

Samsung Electronics, the benchmark Kospi’s biggest company by market capitalization, closed at 1,893,000 won ($1,650), down 0.42 percent from the previous trading day. It was the first time in four trading days that the price dropped below the 1.9 million won level.

The company’s stock was already sliding one day before the arrest, when the court was reviewing an arrest warrant for Lee. That day, Samsung Electronics’ shares retreated 2.1 percent.

Most other major Samsung shares also fell on Friday, but shares of Hotel Shilla, a Samsung affiliate, surged on rumors that Lee Jae-yong’s younger sister and hotel CEO Lee Boo-jin may see her standing rise in the absence of Samsung’s de facto leader. Hotel Shilla closed up 0.96 percent at 47,400 won on Friday. During the trading session, it soared as high as 8 percent to 50,800 won but settled later in the day.

The group’s marketing arm, Cheil Worldwide rose 2.11 percent to 19,350 won. Samsung BioLogics, which had to fight allegations of fraud ahead of its listing last year, gained 0.94 percent to close at 160,500 won.

Analysts’ views about the future of Samsung Group were as mixed as the conglomerate’s stock performance on Friday. Kim Yong-koo at Hana Financial Group said Lee’s case might have a big impact on the group’s shares since Samsung Electronics could face fines from other countries if it is found guilty of bribery.

“When looking at past cases of owners being brought to court, there is a big difference between whether they’re questioned at home or in custody,” he said. “In the case of Hyundai Motor Chairman Chung Mong-koo in 2006 when he was in custody and Hanwha Chairman Kim Seung-youn being questioned for a long period of time in 2011, both had bigger impacts on weakening their shares. However, former cases with Samsung, SK and CJ owners did not have them in custody and didn’t have that big an impact on the market.

Kim Dong-won, an analyst at KB Securities, believes the impact of Lee’s arrest will be temporary.

“Samsung’s semiconductor and display businesses continue to improve, and their sales will be stable at least until next year,” Kim said. “I still think Samsung Electronics’ shares are a bit underrated when compared to its competitors overseas. I’m staying with the ‘buy’ recommendation and keeping the target at 2.4 million won.”

BY KIM YOUNG-NAM [kim.youngnam@joongang.co.kr]