Korea / Special Sits, Pairs, Index Rebalancing, Clepsydra Capital

Sanghyun Park

Korea / Special Sits, Pairs, Index Rebalancing

Event-Driven

<p>What's clear at this point is that the Lee family has to address immense inheritance tax (at least ₩9T).</p><p>Which family member gets how much is a secondary question. What's important now is the amount of the tax that the entire family has to bear.</p><table class="table table-striped">
<colgroup>
<col width="300">
<col width="150">
<col width="150">
</colgroup>
<tbody>
<tr>
<td data-sheets-value='{"1":2,"2":"Wealth owned by Lee Kun-hee (₩B)"}'>Lee Kun-hee's shareholding (₩B)</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Shareholding"}'>Shareholding</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"Value"}'>60D avg. value</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Samsung Electronics Co Ltd"}' data-sheets-formula='=googlefinance(R[0]C[3], "name")'>Samsung Electronics Co Ltd</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.04175582576286636}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=Shareholding!R[7]C[2]">4.18%</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":15006.24664}' data-sheets-numberformat='{"1":2,"2":"#,##0.0"}' data-sheets-formula='=googlefinance(R[0]C[1], "price")*googlefinance(R[0]C[1], "shares")*R[0]C[-1]/1000000000'>15,006.2</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Samsung Life Insurance co., Ltd"}' data-sheets-formula='=googlefinance(R[0]C[3], "name")'>Samsung Life Insurance co., Ltd</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.2075959}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=Shareholding!R[99]C[2]">20.76%</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":2619.860258}' data-sheets-numberformat='{"1":2,"2":"#,##0.0"}' data-sheets-formula='=googlefinance(R[0]C[1], "price")*googlefinance(R[0]C[1], "shares")*R[0]C[-1]/1000000000'>2,619.9</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Samsung C&amp;T Corp"}' data-sheets-formula='=googlefinance(R[0]C[3], "name")'>Samsung C&amp;T Corp</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.029032145887066426}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=Shareholding!R[-19]C[2]">2.90%</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":564.276232}' data-sheets-numberformat='{"1":2,"2":"#,##0.0"}' data-sheets-formula='=googlefinance(R[0]C[1], "price")*googlefinance(R[0]C[1], "shares")*R[0]C[-1]/1000000000'>564.3</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Total"}'><strong>Total</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"-"}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}'><strong>-</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":17626.106898}' data-sheets-numberformat='{"1":2,"2":"#,##0.0"}' data-sheets-formula="=sum(R[-3]C[0]:R[-2]C[0])"><strong>17,626.1</strong></td>
</tr>
<tr><td colspan="3" rowspan="1" data-sheets-value='{"1":2,"2":"Source: KRX FIND"}'>Source: KRX FIND</td></tr>
</tbody>
</table><section class="figure"><table class="table table-striped">
<colgroup>
<col width="100">
<col width="100">
</colgroup>
<tbody>
<tr><td colspan="2" data-sheets-value='{"1":2,"2":"Wealth owned by Lee Kun-hee (₩B)"}'>Inheritance tax (₩B)</td></tr>
<tr>
<td><p>Total shareholding value</p></td>
<td style="text-align: right;">17,626.1</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Taxable after various deductibles (70%)"}'>Taxable after various deductibles (70%)</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":12432.1}' data-sheets-numberformat='{"1":2,"2":"#,##0.00","3":1}'>12,432.1</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"20% extra charge (management premium)"}'>20% extra charge (management premium)</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":14918.6}' data-sheets-numberformat='{"1":2,"2":"#,##0.00","3":1}'>14,918.6</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Inheritance tax at a 60% tax rate"}'><strong>Inheritance tax at a 60% tax rate</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":8951.1}' data-sheets-numberformat='{"1":2,"2":"#,##0.00","3":1}'><strong>8,951.1</strong></td>
</tr>
<tr><td colspan="2" data-sheets-value='{"1":2,"2":"Source: KRX FIND"}'>Source: KRX FIND</td></tr>
</tbody>
</table></section><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/167/324/original/2.png?1603665274" class="editor-image img-responsive" data-smartkarma-image-id="167324"></figure><div class="content-highlight"><p><strong>The first question that will likely hit the market must be how the family would approach this tax situation.</strong></p></div></section>

What's clear at this point is that the Lee family has to address immense inheritance tax (at least ₩9T).Which family member gets how much is a secondary question. What's important now is the amount of the tax that the entire family has to bear.







Lee Kun-hee's shareholding (₩B)
Shareholding
60D avg. value


Samsung Electronics Co Ltd
4.18%
15,006.2


Samsung Life Insurance co., Ltd
20.76%
2,619.9


Samsung C&amp;T Corp
2.90%
564.3


Total
-
17,626.1

Source: KRX FIND







Inheritance tax (₩B)

Total shareholding value
17,626.1


Taxable after various deductibles (70%)
12,432.1


20% extra charge (management premium)
14,918.6


Inheritance tax at a 60% tax rate
8,951.1

Source: KRX FIND

The first question that will likely hit the market must be how the family would approach this tax situation.

LJY's New Samsung May Begin with Sale of Financial Arm (Life)

Silver Point

Thomas J. Monaco

Independent Insight Provider

Silver Point is a boutique research firm that focuses on the broader financial services sector, with a particular focus on troubled institutions globally. 

Asia Ex Japan

Thematic (Sector/Industry)

<p><strong><em>*High Court Ruling: </em></strong>The United Kingdom High Court ruled on a test case brought forth by the Financial Conduct Authority (FCA) indicates that the "COVID-19 pandemic and the government and public response were a single cause of the covered loss, which is a key requirement for claims to be paid even if the policy provides cover". The decision on th Business Interruption (BI) case against the insurance industry is mostly in favorable to policyholders; and</p><p> <strong><em>*Asia-Pac To Follow: </em></strong>As many countries in Asia-Pacific are Common Law nations, High Court rulings such as this have a tendency to set precedent. It also wouldn’t be a surprise to see significant capital raises given the challenges to solvency.  </p>

*High Court Ruling: The United Kingdom High Court ruled on a test case brought forth by the Financial Conduct Authority (FCA) indicates that the "COVID-19 pandemic and the government and public response were a single cause of the covered loss, which is a key requirement for claims to be paid even if the policy provides cover". The decision on th Business Interruption (BI) case against the insurance industry is mostly in favorable to policyholders; and *Asia-Pac To Follow: As many countries in Asia-Pacific are Common Law nations, High Court rulings such as this have a tendency to set precedent. It also wouldn’t be a surprise to see significant capital raises given the challenges to solvency.  

Asian Insurers – High Court Ruling A Harbinger For Region

<p>Samsung C&amp;T was the most net purchased stock in Korea by local institutions last week (August 10~14).</p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/153/428/original/8.png?1597776741" class="editor-image img-responsive" data-smartkarma-image-id="153428"></figure><p></p><p>Just in two trading days (August 12~13), local institutions had net purchased a total of ₩85bil.</p><p>In contrast, they had net purchased only ₩21bil worth of Samsung Life shares during these two days.</p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/153/398/original/2.png?1597772937" class="editor-image img-responsive" data-smartkarma-image-id="153398"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/153/399/original/1.png?1597773054" class="editor-image img-responsive" data-smartkarma-image-id="153399"></figure><p>It appears that they are putting their money on C&amp;T instead of Life for a possible stake transfer involving Sammy shares.</p>

Samsung C&amp;T was the most net purchased stock in Korea by local institutions last week (August 10~14).Just in two trading days (August 12~13), local institutions had net purchased a total of ₩85bil.In contrast, they had net purchased only ₩21bil worth of Samsung Life shares during these two days.It appears that they are putting their money on C&amp;T instead of Life for a possible stake transfer involving Sammy shares.

Why Are Local Institutions Buying Samsung C&T Instead of Life over Elec Stake Sale?

Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

<p>Samsung C&amp;T is one of the most likely candidates to purchase additional stakes in Samsung Electronics. One of the strategies that Samsung C&amp;T could take is to sell its entire stake in <a href="https://n.news.naver.com/article/008/0004455890?cds=news_edit" target="_blank" rel="noopener">Samsung Biologics (43.4%).</a> Samsung Biologics currently has a market cap of 52.9 trillion won so a 43.4% stake would be worth 23 trillion won. The buyer of this stake in Samsung Biologics would most likely be Samsung Electronics. </p><p>If Samsung Life Insurance and Samsung F&amp;M  sell their stakes in Samsung Electronics, this could result in <a href="https://n.news.naver.com/article/008/0004455890?cds=news_edit" target="_blank" rel="noopener"><strong>5 trillion won</strong></a> ($4.2 billion) or more in capital gains and other taxes. There are also taxes that Samsung C&amp;T needs to pay if it decides to sell Samsung Biologics to buy more shares of Samsung Electronics. However, is there another solution for the Samsung Group other than having Samsung C&amp;T selling its 43.4% stake in Samsung Biologics (which will also result in big capital gains taxes)?</p><div><div><div><p><strong>Why can't Samsung Electronics buy the stakes of Samsung Electronics sold by Samsung Life Insurance and Samsung F&amp;M and cancel these shares? Isn't this a better option for the Lee family, Samsung Electronics' shareholders, and the entire Samsung Group (especially paying lower amounts of taxes)?</strong></p></div></div></div>

Samsung C&amp;T is one of the most likely candidates to purchase additional stakes in Samsung Electronics. One of the strategies that Samsung C&amp;T could take is to sell its entire stake in Samsung Biologics (43.4%). Samsung Biologics currently has a market cap of 52.9 trillion won so a 43.4% stake would be worth 23 trillion won. The buyer of this stake in Samsung Biologics would most likely be Samsung Electronics. If Samsung Life Insurance and Samsung F&amp;M  sell their stakes in Samsung Electronics, this could result in 5 trillion won ($4.2 billion) or more in capital gains and other taxes. There are also taxes that Samsung C&amp;T needs to pay if it decides to sell Samsung Biologics to buy more shares of Samsung Electronics. However, is there another solution for the Samsung Group other than having Samsung C&amp;T selling its 43.4% stake in Samsung Biologics (which will also result in big capital gains taxes)?Why can't Samsung Electronics buy the stakes of Samsung Electronics sold by Samsung Life Insurance and Samsung F&amp;M and cancel these shares? Isn't this a better option for the Lee family, Samsung Electronics' shareholders, and the entire Samsung Group (especially paying lower amounts of taxes)?

Who Will Buy SamE Stake Potentially Sold by Samsung Life? Samsung C&T or SamE?

Equity Bottom-Up

Samsung Fire & Marine Insuranc / Equity Bottom-Up

<p>One of the biggest market movers in Korea in August has been the discussions about the potential change in the Insurance Business Act, which could force the major insurance companies in Korea to calculate their shareholding in a subsidiary to 3% of its total assets, instead of the current historical cost method.</p><p>Samsung F&amp;M Insurance (Pref) is currently at 134,00 won which remains at a 28% discount to the common shares. With the change in the Insurance Business Act, the two major Samsung insurance companies (Samsung F&amp;M and Samsung Life) may be required to sell their stakes in Samsung Electronics so that they remain below 3% of total assets. </p><div class="content-highlight"><p>With the potential change to the Insurance Business Act, there could be a greater amount of transparency related to Samsung F&amp;M, Samsung Life Insurance, and the rest of the Samsung Group related shares and this could also encourage a greater amount of <strong>LIQUIDITY</strong> into these insurance companies shares of the Samsung Group which could lead to a <strong>reduced discount</strong> of the pref shares versus the common. <strong>Therefore, this could lead to an additional positive boost to Samsung F&amp;M Pref shares.</strong></p></div>

One of the biggest market movers in Korea in August has been the discussions about the potential change in the Insurance Business Act, which could force the major insurance companies in Korea to calculate their shareholding in a subsidiary to 3% of its total assets, instead of the current historical cost method.Samsung F&amp;M Insurance (Pref) is currently at 134,00 won which remains at a 28% discount to the common shares. With the change in the Insurance Business Act, the two major Samsung insurance companies (Samsung F&amp;M and Samsung Life) may be required to sell their stakes in Samsung Electronics so that they remain below 3% of total assets. With the potential change to the Insurance Business Act, there could be a greater amount of transparency related to Samsung F&amp;M, Samsung Life Insurance, and the rest of the Samsung Group related shares and this could also encourage a greater amount of LIQUIDITY into these insurance companies shares of the Samsung Group which could lead to a reduced discount of the pref shares versus the common. Therefore, this could lead to an additional positive boost to Samsung F&amp;M Pref shares.

South Korea

Samsung Fire & Marine Insurance Co., Ltd. provides insurance services. The Company offers auto, fire, marine, casualty, health, leisure, and retirement products and services. Samsung Fire & Marine Insurance serves customers in South Korea.

Samsung Fire & Marine Insuranc (000815 KS)

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Samsung Fire & Marine Insuranc (000815 KS)

LJY's New Samsung May Begin with Sale of Financial Arm (Life)

LJY's new Samsung may begin by selling the financial arm. The family needs to liquidate the Life shareholding for inheritance tax, but also...

Sanghyun Park

Asian Insurers – High Court Ruling A Harbinger For Region

*High Court Ruling: The United Kingdom High Court ruled on a test case brought forth by the Financial Conduct Authority (FCA) indicates that the...

Thomas J. Monaco

Why Are Local Institutions Buying Samsung C&T Instead of Life over Elec Stake Sale?

Samsung C&T was the most net purchased stock in Korea by local institutions last week (August 10~14).Just in two trading days (August 12~13),...

Sanghyun Park

Who Will Buy SamE Stake Potentially Sold by Samsung Life? Samsung C&T or SamE?

Samsung C&T is one of the most likely candidates to purchase additional stakes in Samsung Electronics. One of the strategies that Samsung...

Douglas Kim

Samsung F&M Preferred - Close the Gap

One of the biggest market movers in Korea in August has been the discussions about the potential change in the Insurance Business Act, which could...

Douglas Kim

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