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Samsung's Rise After Chairman's Unfortunate Death

This Monday (10/26), shares of Samsung Electronics and its affiliates significantly rose after chairman Lee Kun-Hee passed away a day earlier. The company announced that Lee died at the age of 78 after six years in the hospital following a heart attack. His family, including his son (also Vice Chairman), Jay Y. Lee was by his side according to the company’s statement. Lee Kun-Hee will always be remembered as one of the richest men in South Korea with a net worth of $21 billion and for his success in turning Samsung into a global technology and industrial powerhouse. He took over in 1987 after the death of his father, Lee Byung-chul, who founded the conglomerate. Lee’s health trouble has been worrying ever since 2014 and from then on, Jay Y. Lee had become the de facto leader of Samsung. Ensuing afterwards, the market reacted with positive sentiments as they look forward to Jay Y. Lee’s capabilities and also due to his long-standing of being a major shareholder of Samsung C&T and Samsung SDS. On Monday (08/26), Samsung shares listed in South Korea were up 0.33% at market close, while Samsung SDS shares rose 5.51%. Furthermore, shares of Samsung C&T and Samsung Life Insurance closed up 13.5% at a two-month high. Despite the market gain, the burden of paying the inheritance tax estimated at about 10 trillion won ($8.9 billion) for listed stockholdings alone remains.

Before the unfortunate news was brought to light, Samsung's past profit and performance had been relatively pleasing as shown from their three months' profit that ended in September (rose approximately 58% as compared to last year's). On the 8th of October, the company’s accounting profit was predicted to reach a value of ₩12.3 trillion or about $10.6 billion which has outshined the prediction of the previous year totaling up to ₩7.78 trillion, as stated on Samsung earnings guidance. Managing Director and Senior Analyst of Bernstein, Mark Newman, said that the significant increase in September was due to the rise of sales in smartphones. Newman explained there was a rebound in demand for Samsung’s flagship smartphone models, encompassing the Galaxy Note 20 and the Samsung Galaxy Fold. Moreover, Samsung's marketing strategy during this unprecedented era which could be defined as online-centric has proven to increase its earnings from its other products. Samsung also took advantage of the conflict between Huawei and the United States, in which they predict that when Huawei runs out of chips for their smartphone productions, customers will ultimately choose Samsung.

Following the late case about the death of Chairman Lee Kun Hee, and also considering the news of the soar on shares of firms affiliated with the conglomerate Samsung Group, the benchmark KOSPI Composite Index eventually dropped for 0.72%, to close at 2,343.91 on Monday (10/26). On Tuesday (10/27), KOSPI tumbled again, reaching the level of 2,330.84, but on the following day, KOSPI closed up by a significant 0.65% climb to 2,345.26. While the Indonesia Stock Exchange did not operate until Sunday due to a long holiday to commemorate the Prophet's Birthday, Asian Exchanges seem to have mixed performances due to numerous sentiments from inside and across Asia. At the opening of trading on Wednesday (10/28), Japan's Nikkei was corrected for 0.29%, while Hong Kong's benchmark Hang Seng Index was also corrected for 0.24%, with the drop also to be seen on Singapore's STI. One of the major incentives of the Asian stocks' current performances is the increase in daily cases of COVID-19 in the US and Europe regions together with the uncertainty on the COVID-19 stimulus package from the US government. In South Korea itself, aside from the positive sentiment brought by the titan Samsung Group, there was also a negative sentiment from the macroeconomic viewpoints. As the South Korean economy contracted by -2.7% in Q2, the nation's GDP contracted again by -1.3% in Q3 (YoY). In essence, it is undeniable that the current state has many ongoing sentiments that cause the global stock market to fluctuate.

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