Recent political and corporate developments in Korea, including the Samsung case, are critical to investors’ assessment of risk.
That’s the view of Ashish Goyal, head of emerging markets equity at NNIP Investment Partners.
In the latest development of the Samsung scandal, chief of group Jay Y. Lee’s bribery trial has been reassigned to another judge from Lee Young-hoon, who was questioned for her father-in-law’s connection with Choi Soon-sil.
It is believed that judge Lee’s father-in-law was a financial sponsor for Choi, who was the confidante of former president Park Geun-hye and a central figure in the graft scandal that led to Park’s ultimate downfall on March 10, and the Samsung chief’s indictment.
Goyal told Citywire Asia that he is monitoring the developments closely.
‘With the president’s impeachment we will have to see how much the new president pushes for strong corporate governance,’ he said, adding that he is not going to change his EM equity portfolio positioning after the outburst of the scandal.
‘Our investments are in companies which have robust businesses and can weather short term volatility. On average we have a bias towards companies with better corporate governance standards. Should the market sell off on perceived increases in risk, we may add to our positions,’
Goyal also said that historically, there has been a close relationship between Korean businesses and politics, therefore, he believes that the improved governance of companies in the face of greater government scrutiny would be overall good for all stakeholders.
Jupiter AM's view
Meanwhile, Jason Pidcock, head of strategy, Asian income at Jupiter, also issued a statement saying that Samsung’s reforms point to a brighter future despite boardroom trouble.
‘The Samsung Group is in a period of change regarding its corporate structure and corporate governance,’ Pidcock said. ‘The Jupiter Asia Pacific Income fund has a position in Samsung Electronics because we believe that the process of change will be positive for shareholders, as well as the operating climate.
‘At the moment it may appear as though the process is “two steps forward and one back”, but in my view it’s probably more positive than that.’
Pidcock also said that headlines regarding accusations against Samsung’s family controllers are sensational, but he sees them as almost a parallel story to benefits which should accrue to shareholders from greater capital returns, and a more optimal group structure.
‘Looser family control and more professional management control is likely to be taken well by the market so in my opinion any legal proceedings which, at least, keep that one track will be a good thing, not bad.
‘We have not been surprised by the strength in Samsung’s share price over the last 12 months and are comfortable with it being the portfolio’s largest position given its single-digit forward P/E, its history of rising dividends and Samsung’s exposure to various interesting areas of the technology landscape, as well as future areas such as artificial intelligence and virtual reality.’