SKorea probes British pension fund

SKorea probes British pension fund

Agence France-Presse, Seoul

South Korea's financial watchdog is looking into allegations that British pension fund Hermes Investment Management violated stock market rules, officials said on Thursday.

Hermes came under fire this month after it sold a five percent stake in Samsung Corp., the trading arm of South Korea's largest conglomerate Samsung Group, sparking a fall in the stock.

The sale on Dec. 3 came just days after Robert Clements, director of the fund's emerging market management, told a South Korean newspaper that Samsung Corp. could become the target of a hostile takeover by foreign investors if it failed to improve corporate governance.

The stock price rose to 15,850 won (US$14.9) following Clements' remarks but fell sharply after the fund then sold its stake in Samsung Corp.

South Korean investors have since accused Hermes of manipulating stock prices.

"We are studying whether the case is in violation of stock market rules banning the spread of false information or rumors in order to talk up stock prices," a senior Financial Supervisory Service official told AFP.

"If anything is found suspicious, we will launch a formal probe."

Stock market authorities said Hermes bought five percent of Samsung Corp. shares in March for investment purposes, becoming the single biggest foreign investor in the company.

On Nov. 12, Hermes said it had discussions with Samsung Corp.'s management on matters that included the "strategic relevance" of Samsung Corp.'s stake in Samsung Electronics and the level of future dividends.

Samsung Corp. owns about four percent of Samsung Electronics, the world's largest chip company.

"In addition we did discuss the vulnerability of the company to a hostile bid approach if it did not take action to address the above issues," Hermes said in a statement.

The statement and Clements' subsequent interview on Dec. 1 prompted retail investors to buy Samsung Corp. shares.

South Korean law provides for heavy fines and lengthy jail terms for stock manipulation but there have been no cases involving foreign investors.

The latest development comes amid growing calls in South Korea to curb the power of foreign investors, who have become major players in many companies and in the stockmarket.

The watchdog, however, said the Hermes case was unrelated to such sentiment triggered by growing foreign holdings which now account for 43 percent of South Korean stocks, up from 40.7 percent a year ago.

Hermes manages about 94 trillion won of assets for pension funds, insurance companies and government agencies. It has also supported an attempt by Monaco-based Sovereign Asset Management to oust SK Corp. chairman Chey Tae-Won.

A South Korea court ruled in favor of the oil refiner on Monday and rejected Sovereign's call for a special shareholders' meeting to vote on management.

The Monaco-based fund, which holds a 14.9 percent stake in SK Corp., insists shareholders should be allowed to vote on whether to retain Chey, 42, who was sentenced last year to three years in prison for irregular dealings and accounting aimed at tightening his control over SK Corp. and its parent SK Group, South Korea's third-largest family-run conglomerate.

Chey was freed on bail pending an appeal and remains chairman of SK Corp.