Despite a decision made by Securities & Futures Commission that a change in Samsung Biologics’ accounting corresponds to an intentional fraudulent accounting, there is still uncertainty amongst markets. There are various concerns such as loss of many investors due to delisting and increase in disparate ratio of ETFs (Exchange Traded Fund) that have incorporated Samsung Biologics.
It is likely that conflicts surrounding Samsung Biologics will be prolonged as there are even requests for inspection on Samsung C&T.
According to Korea Exchange, trading of Samsung Biologics’ stocks has been stopped since 4:39 A.M. of the 14th. Transaction involving Samsung Biologics’ stocks will be put on halt until Korea Exchange’s substantive inspection on Samsung Biologics regarding its ability as a listed company is completed.
Timing for resuming transactions can be changed depending on the results of an evaluation done by Korea Exchange. Korea Exchange needs to finish its evaluation within 14 business days and decide whether to forward this case to Business Review Committee or not. An issue that is forwarded to Business Review Committee needs to be decided within 14 days. There is also a possibility of Korea Exchange giving Samsung Biologics to improve its issue within 1 year.
Stock firms predict that blue-chip stocks, which are worth more than $19.5 billion (22 trillion KRW) will not be delisted immediately by Securities & Futures Commission’s decision as there was not an incident in the past where a company was delisted for violating standards for accounting processing.
“Although 16 companies had been reviewed by us after we have implemented a system for evaluating a company’s eligibility to be a listed company, there was not a single case where a company was actually delisted.” said Vice-Chairman Kim Yong-beom of Financial Services Commission who is also the chairman of Securities & Futures Commission. “We cannot predict whether Samsung Biologics will be delisted at this moment.”
Some predict that stopping transactions alone can have significant impact on other markets. “Stoppage of transactions involving Samsung Biologics’ stocks can cool off desire for investment.” said Department Head Kim Hyung-ryeol of Research Center Headquarters. “There is a chance that distrust towards industries can turn into pessimistic views towards entire South Korean stock market.”
Level of uncertainty for index products such as ETFs that have incorporated Samsung Biologics is even bigger. There are currently 73 ETFs that have incorporated Samsung Biologics. As of the 13th, Samsung Biologics’ stocks owned by ETFs were worth $143 million (161.7 billion KRW). Samsung Biologics can greatly impact uncertainty of prices of products such as ‘TIGER200 Healthcare’ that is responsible for 16.38% of ETF’s entire net worth.
“There is a chance that level of uncertainty for ETF’s products can grow.” said a representative for a financial investment industry. “There is also a chance that amount of transactions can actually shrink since actual values are not applied.”
A bigger problem is whether Securities & Futures Commission will carry out an inspection on Samsung C&T. Accounting industry believes that an official document reported by Park Yong-jin, who is a member of The Minjoo Party of Korea, was the motive for this decision.
“Since there was a problem with Samsung C&T’s accounting processing of a merger within Samsung’s internal document, Securities & Futures Commission must request Financial Supervisory Service to start an inspection on Samsung C&T.” said Park Yong-jin. Civil groups such as Citizens’ Coalition for Economic Justice and others are also requesting Securities & Futures Commission to take actions.
Because there is a chance that Securities & Futures Commission will actually carry out an inspection due to many requests, Samsung C&T’s stock price once fell by 5% earlier this day compared to the previous day.
Staff Reporter Ryu, Geunil | ryuryu@etnews.com