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THE INVESTOR
May 21, 2018
Big Reunion

Economy

[MOON’S 1ST YEAR] Chaebol: winners and losers

  • PUBLISHED :May 10, 2018 - 10:26
  • UPDATED :May 15, 2018 - 10:05
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[THE INVESTOR] The nation’s family-run conglomerates were on a roller coaster ride in the first year of the liberal Moon Jae-in government. Some of them struggled to cope with toughened regulatory surveillance, while others were reeling from their own internal risks. 

One thing to note is that contrary to the concerns, Moon’s chaebol reform policy had a limited impact in deterring investor sentiment. The benchmark bourse KOSPI soared more than 7 percent, while the secondary KOSDAQ jumped a whopping 33 percent -- the highest increase among the past five administrations. 


Here are some of the prominent winners and losers under the new government in terms of stock value, reputation, owner risk and business growth.


SAMSUNG ELECTRONICS [LOSER]

-- Reputation was tarnished by Vice Chairman Lee Jae-yong’s corruption trials but had limited impact on business; stock price rose 9 percent over the past year on record-breaking earnings
-- Regulatory surveillance expected to get tougher ahead of pending leadership succession
-- Elliott upping pressure as it seeks compensation on losses from 2015 merger between Samsung C&T and Cheil Industries
-- China’s chip production to take a toll on sales
-- BUT, anticipation is building toward the next Galaxy S ahead of the series’ 10th anniversary next year and the pending first foldable phone


OTHER SAMSUNG UNITS [LOSER] 

-- Shares of Samsung BioLogics, the biggest gainer in KOSPI over the past year, tumbled on accounting fraud allegations, and a bumpy road lies ahead due to the anticipated stake sale of its partner Biogen later this year
-- Samsung Securities still reeling from dividend payout error, regulators mulling fines for breaching trading rules
-- Shares of other key units closely linked to succession, including Samsung C&T and Samsung SDS, experiencing stock price declines regardless of business performance


KOREAN AIR [LOSER]

-- Owner risk snowballing as Hanjin Group’s founding family faces investigations on multiple charges of assault, business obstruction and tax evasion
-- Company morale has hit rock-bottom, as employees are calling on Chairman Cho Yang-ho to step down
-- First-quarter earnings to fall on hike in fuel prices, losses in hotel business in Los Angeles, incentive payouts
-- BUT, JV with Delta Airline triggering expectations for cost-cutting and more flights


HYUNDAI MOTOR GROUP [LOSER]

-- Shares of Hyundai Motor, Kia Motors and Hyundai Mobis suffered losses over the past year largely due to sluggish car sales in key markets
-- Governance reform plans earned government backing despite the owner family facing huge capital gains tax of more than 1 trillion won
-- Elliott staging proxy battle but limited impact due to tiny stake
-- BUT, China sales almost doubled in April


LG ELECTRONICS [WINNER]

-- Stock price jumped almost 40 percent over the past year largely buoyed by upbeat TV and appliance sales
-- Still, no sign of recovery in sluggish phone sales
-- Beefing up automotive parts business; acquired Austrian light maker ZKW Group for 1.4 trillion won – the largest-ever purchase by LG
-- Free from so-called owner risk, as the group has already divided business units among family members


SK GROUP [WINNER]

-- M&A talks speeding up; Big deals include SK Siltron (620 billion won), Toshiba (4 trillion won), ADT Caps (2.7 trillion won)
-- Key businesses such as semiconductor, biotech and telecom in line with the government’s industrial push
-- Shares of SK hynix soared more than 50 percent
-- Rosy business outlook after acquisition of Toshiba’s chip business unit
-- Beefing up investments in connected car businesses like EV batteries, IoT and car-sharing; Pharmaceutical units developing new drugs

By Lee Ji-yoon (jylee@heraldcorp.com)

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