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Samsung stocks rebound but Lee's detention raises doubts on pledges for change

01/19/2021 | 01:53am EDT
FILE PHOTO: Samsung Electronics Vice Chairman, Jay Y. Lee, leaves the Seoul high court in Seoul

SEOUL (Reuters) - Shares in Samsung Electronics and affiliates rebounded on Tuesday, reversing losses stemming from Samsung Electronics Vice Chairman Jay Y. Lee's receiving a two-and-a-half year prison term on Monday.

Analysts said the short-lived impact of Lee's detention on share prices is similar to what happened the first time Lee was imprisoned in 2017, despite what may be more reactivity to news and rumours because of increased retail investor participation in the stock market.

But corporate governance experts fear Lee's pledge to make compliance a top priority may lose steam, especially because it is no longer a part of his case for leniency.

Lee entered a detention centre on Monday after the Seoul High Court sentenced him to prison for bribing an associate of former President Park Geun-hye and other charges. Because he has already served one year in prison, he will serve 18 more months.

In his final statement to the court in December, Lee pledged a "new Samsung", including guaranteeing labour union activities and not handing over management rights to his children at the family-controlled conglomerate.

Moreover, he promised "stricter compliance and transparent operation" of the so-called Business Support Task Force, a team in Samsung Electronics, some of whose executives a Seoul court found guilty of destroying evidence about an affiliate's accounting practices, said to be aimed at helping boost Lee's control of the tech giant.

"I will transform my mind and stance and create a thorough compliance system that can resist undue pressure," Lee said.


An independent compliance committee, set up last year after the Seoul High Court began proceedings, said it would continue meeting with CEOs and making recommendations despite being dismissed by the court on Monday as ineffective.

"Regardless of the outcome of the trial, the committee is determined to continue its responsibilities faithfully," a committee official told Reuters, adding that the members have a two-year term, which can be extended.

But corporate governance experts expressed scepticism, noting that such efforts are likely to peter out.

"The committee is an organisation hastily formed for the trial. There were and still are extensive compliance organisations within each affiliate, but the problem was that none of them could check the actions of the conglomerate's owner family," said Park Sang-in, professor at Seoul National University and a corporate governance expert.

Samsung shares may show more volatility in the short term in particular with the recent influx of retail investors riding a liquidity boom, including those hoping for more generous dividend payouts by Samsung intended to "create a good corporate image" in Lee's defence, said Park Sung-soon, an analyst at Cape Investment & Securities.

After falling on Monday and early Tuesday, shares in Samsung Electronics and affiliates Samsung C&T and Samsung Life Insurance reversed losses and rose 2.5%, 0.7% and 0.5% respectively as of 0621 GMT, compared with a 2.6% rise in the wider market.

"On the day (Lee) went to jail in 2017, stocks fell, but in the long run, it did not affect the price much. The vice chairman's imprisonment does not change the company's fundamentals," Park of Cape Investment added.

In 2017-2018, during Lee's year-long detention, Samsung Electronics shares rose 27% on the back of strong memory chip demand.

Retail investors were net buyers worth 177 million won of Samsung Electronics stocks in 2020, buying from foreign investors and South Korean institutions, according to Korea Exchange data.

(Reporting by Joyce Lee; Additional reporting by Heekyong Yang and Joori Roh; Editing by Jack Kim and Gerry Doyle)

By Joyce Lee

© Reuters 2021
Stocks mentioned in the article
ChangeLast1st jan.
SAMSUNG C&T CORPORATION 0.28% 108500 End-of-day quote.-4.41%
SAMSUNG ELECTRONICS CO., LTD. 0.80% 63200 End-of-day quote.14.29%
SAMSUNG LIFE INSURANCE CO., LTD. -1.26% 62600 End-of-day quote.-11.83%
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Analyst Recommendations on SAMSUNG ELECTRONICS CO., LTD.
More recommendations
Sales 2023 273 486 B 211 B 211 B
Net income 2023 12 868 B 9,92 B 9,92 B
Net cash 2023 107 295 B 82,7 B 82,7 B
P/E ratio 2023 32,8x
Yield 2023 2,28%
Capitalization 421 232 B 325 B 325 B
EV / Sales 2023 1,15x
EV / Sales 2024 0,97x
Nbr of Employees -
Free-Float 83,1%
Duration : Period :
Samsung Electronics Co., Ltd. Technical Analysis Chart | MarketScreener
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Technical analysis trends SAMSUNG ELECTRONICS CO., LTD.
Short TermMid-TermLong Term
Income Statement Evolution
Mean consensus BUY
Number of Analysts 39
Last Close Price 63 200,00 KRW
Average target price 76 461,54 KRW
Spread / Average Target 21,0%
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Managers and Directors
Jong-Hee Han Vice Chairman & Co-Chief Executive Officer
Kye Hyun Kyung Co-Chief Executive Officer & Executive Director
Hee-Chan Roh Chief Financial Officer
Han-Jo Kim Chairman
Jae-Yong Lee Executive Chairman
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