Corruption scandal may explain subdued KOSPI lately:
Korean Prosecutors Question Senior Hyundai Executive
A WALL STREET JOURNAL ONLINE NEWS ROUNDUP
March 29, 2006 8:32 a.m.
SEOUL -- Prosecutors said Wednesday they had questioned a top Hyundai Motor Co. executive in a widening probe into suspicions the largest South Korean auto maker created slush funds to bribe government officials.
Chae Yang Ki, president of Hyundai Motor's corporate-planning division, was the first high-level company official to undergo questioning since the investigation was made public Sunday with an extensive raid by investigators of Hyundai Motor offices.
Mr. Chae was questioned Tuesday, according to Hyundai Motor and the Supreme Public Prosecutors' Office. Also Tuesday, the head of a Hyundai Motor subsidiary, Glovis Co., was arrested on charges of embezzling company money to create slush funds.
Details of the charges against Lee Ju Eun, the arrested executive, weren't available.
Hyundai Motor, which also owns Kia Motors Corp., is suspected of using the secret money to bribe politicians and government officials.
The investigation grew out of a scandal surrounding a jailed lobbyist, Kim Jae Rok, who was arrested last week on charges of receiving money from businesses in exchange for promises he would use his connections with influential figures to win favors.
Hyundai Motor is suspected of paying Mr. Kim millions of dollars from slush funds in pursuit of his influence in construction approvals and permits.
On Sunday, prosecutors raided the offices of Hyundai Motor, Kia, Glovis and auto-electronic-parts maker Hyundai Autonet Co., and barred about 10 group officials from overseas travel as part of the probe.
Shares of Hyundai Motor closed flat in Seoul trading Wednesday, while Kia Motors slipped 0.3%. Glovis retreated 3.1%, while Hyundai Autonet declined 2.4%. The benchmark Korea Composite Stock Price Index finished up 0.1% at 1332.72.
Analysts, however, expect the impact of the scandal to be short-lived.
"It's true that the news is a negative for investor sentiment, but it won't hurt the fundamentals of Hyundai or Kia," said Suh Sung Moon, an analyst at Korea Investment & Securities.
It might be a good opportunity for investors to buy Hyundai Motor shares at a bargain, Yong Dai In, another analyst at Goodmorning Shinhan Securities said.
"Considering the huge [potential] impact on the country's economy, I don't think the prosecution will extend this scandal to the entire Hyundai Automotive Group." |
