The Company You Keep

Another feature of Naver Finance that is really useful is the ‘기업개요’ (company summary) part of the ‘기업분석’ section I mentioned last time. This is full of pretty pie charts and the like, but the best stuff is right at the bottom.

The part named ‘관계사 현황’ (status of affiliated companies, I… er… think) tells you what shareholdings in other companies the firm in question has. This is especially valuable in Korea: as you probably know, there is a huge culture of corporate empire-building in this country, whereby large chaebols do their level best to expand into virtually every industry they can, sometimes even regardless of whether it makes any sense or not. For instance, there are 38 listed companies with ‘Hyundai’ in their names; admittedly, some of these will be unrelated to the ‘real’ Hyundai (ie. started by cheeky people who want you to think that their company is part of the giant octopus), but the point stands.

Many of these companies will have shareholdings in each other; this allows the ruling family to preserve control of the business, sometimes at the expense of other investors. Also, chaebol family members often set up firms, which their powerful relatives would force their companies to do business with (sometimes at over-inflated prices). I’m not specifically singling out Hyundai here, although: ahem…

If you had realised this at the time (I didn’t, sadly), you could have made tons of money, by simply following the Chung example and buying into Hyundai Glovis. So, if you have a fair amount of time on your hands, try to find subsidiaries of mega-companies that have large family shareholdings, and guaranteed business from the mother firm. This kind of fishy relationship was bad for Hyundai Motor investors, but fantastic for Hyundai Glovis investors, such as the Chung family members who, as Naver Finance will tell you, still own 56 percent of it.

Daniel Tudor

About Daniel Tudor

Daniel Tudor is the Korea correspondent for The Economist. His book, ‘Korea: The Impossible Country,’ will be published by Tuttle in spring 2011. He often uses obscure British expressions which you can look up here. Find out more at daniel-tudor.com

This entry was posted in Uncategorized. Bookmark the permalink.