Samsung Electronics and Associates Shares Rise After Chairman's Dying
Samsung logo in shop in Shanghai. A South Korean multinational conglomerate.
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SINGAPORE – Shares of Samsung Electronics and its affiliates rose Monday morning after Chairman Lee Kun-hee passed away the day before.
Samsung shares rose 0.66% as of 10:18 a.m. HK / SIN. Shares of Samsung C&T rose 17.31%, Samsung SDS 8.12%, Samsung Life Insurance 5.86%, Samsung BioLogics 0.47%, and Samsung Engineering 0.45%.
The company announced that 78-year-old Lee died on Sunday after a heart attack after six years in hospital. His family, including his son, Vice Chairman Jay Y. Lee, was by his side, according to the company statement.
Senior Lee was credited with making Samsung a global technology and industrial powerhouse. He took over in 1987 after the death of his father Lee Byung-chul, who founded the conglomerate.
Lee had previously been convicted of paying bribes and tax evasion and was pardoned on both occasions.
"His legacy will last forever," Samsung said in a statement.
After Lee's health problems in 2014, his son Jay Y. Lee became the de facto leader of Samsung.
"Now the market is interested in the implications of the Jay Y. Lee succession," SK Kim, executive director and analyst at Daiwa Securities, told CNBC's Street Signs Asia.
"He is the de facto leader of the Samsung group," said Kim on Monday. "He is a major shareholder in Samsung C&T and Samsung SDS, so the market responded positively to the news."
Jay Y. Lee, co-vice chairman of the Samsung Electronics Center, wears a protective mask as he is surrounded by media representatives at the Seoul Central District Court in Seoul, South Korea on Monday, June 8, 2020.
SeongJoon Cho | Bloomberg via Getty Images
Going forward, Samsung could take aggressive action to ensure long-term growth momentum and, according to Kim, consider further improving shareholder returns. He expects Samsung Electronics to see strong profits in 2021, driven by the storage business and increasing adoption of 5G mobile technology, the next generation of high-speed mobile internet that is expected to offer faster data speeds and greater bandwidth.
However, there are still uncertainties about Jay Y. Lee as a potential successor due to his ongoing legal problems.
The younger Lee was in jail after being convicted of paying bribes to obtain government favors and the scandal sparked the impeachment of former President Park Geun-hye. The case, which is on appeal, is reportedly set to resume on Monday.
He is also charged with accounting fraud and manipulation of stock prices, according to Reuters. The process for this started this month.
"Face of the Korean Economy"
President Moon Jae-in recognized the elderly Lee for his role in developing the semiconductor sector into a vital industry for South Korea and for helping Samsung become the leader in the global smartphone market, Yonhap News reported. "As the face of the Korean economy, Samsung has led the way in growing our economy," Moon was quoted as saying.
Samsung is South Korea's largest chaebol – or large, family-run conglomerate that has historically played an important role in the country's economic development. Chaebols control large corporate networks through a circular holding structure, and their control usually exceeds cash flow rights, which means that families, despite small direct holdings, often exert undue influence over group companies.
The elder Lee was the richest stockholder in South Korea, according to Reuters. According to the news agency, he held 4.18% of the common stock of Samsung Electronics and 0.08% of the preferred stock, valued at around 15 trillion won ($ 13.3 billion). According to Reuters, at the close of trading on Friday, he held a 20.76% stake in Samsung Life valued at around 2.6 trillion won and 2.88% in Samsung C&T worth roughly 564 billion won.
The total revenue of Samsung and its subsidiaries was around 17% of South Korean GDP in 2019.
While conglomerates like Samsung have been responsible for economic growth in South Korea in the past, many citizens have long called for political authorities to curtail their power.