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.