Asia report: Markets mostly lower as Samsung chief is arrested

Most Asian markets finished lower on Friday, with Samsung Group at the fore of traders’ minds in the region as its chief was arrested over his alleged role in the cash-for-influence corruption scandal surrounding impeached President Park Geun-hye.

In Japan, the Nikkei 225 was down 0.58% at 19,234.62, while the broader Topix lost 0.42% at 1,544.54.

Electronics maker Sharp beat the market to finish up 2.8%, after it posted revised earnings estimates, confirming it now expected operating income of JPY 46.4bn for the year to 31 March.

That was a significant uptick from previous expectations of JPY 37.3bn.

Sharp also took a razor to their expected losses for the year, taking them down to JPY 27.1bn from JPY 37.2bn.

Toshiba was still at the mercy of market-fed gravity, tumbling 9.23% on Friday and extending the week’s already significant losses.

Shares in the technology company had fallen 27% since the beginning of the week.

Investor sentiment had turned entirely sour on the stock, as reports circulated that the company was desperate for cash to stay afloat, after booking a $6.3bn hit on its Westinghouse US nuclear development acquisition.

The planned spinning out of its appealing memory chip division, which would have injected some cash into the rest of the business, could also be delayed as Toshiba figured out the way forward.

Strength was the theme of the day for the yen, which was last ahead 0.27% to JPY 112.93 per $1.

On the mainland, the Shanghai Composite finished down 0.86% at 3,201.96, while the smaller, technology-focused Shenzhen Composite was off 0.66% at 1,945.10.

Markets in Korea were mixed, with the Kospi virtually flat, losing 0.06% to 2,080.58, while the Kosdaq added 0.34% to finish at 618.7.

Samsung Group’s chief executive Jay Lee was taken into custody early on Friday over allegations he was closely involved in the cash-for-influence scandal that saw President Park impeached.

Both Lee and Samsung have denied all wrongdoing, with a spokesperson for the conglomerate saying: “We will do our best to ensure that the truth is revealed in future court proceedings”.

The group’s main division, Samsung Electronics, saw its shares close down 0.4%, while Samsung C&T was off 2% and Samsung Engineering was 1.2% softer.

Not all parts of the group were down, however, with Samsung Electro-Mechanics adding 0.7% and Samsung SDI up 0.8%.

Analysts were doubtful the arrest would have immediate implications for Samsung, with Fitch Ratings saying in a note that the news wouldn’t have an effect on the group’s credit rating, though it could worsen investor sentiment short-term.

“As Samsung Electronics' credit profit is based on its fundamentals and strength of its businesses, negative sentiment on SEC could be offset by the company's solid performance.”

Hong Kong’s Hang Seng Index finished 0.31% lower at 24,033.74.

Oil prices were higher during Asian trading, but they started to fall in early European hours, with Brent crude last down 0.6% to $55.32 per barrel and West Texas Intermediate losing 0.38% to $53.16.

In Australia, the S&P/ASX 200 fell 0.18% to 5,805.81, with major resources stocks finishing in the red.

BHP Billiton was down 1.11%, Fortescue Metals fell 2.41% and Rio Tinto was 2.14% softer in Sydney trading.

New Zealand’s S&P/NZX 50 lost 0.09%, led lower by communications and media plays - quad-play broadband and telephony provider Spark was down 2.3%, while subscription broadcaster Sky - no relation to the London-listed firm of the same name and nature - was off 2%.

Sky’s losses extended from Thursday’s decline, which came about after its board said it would not delay a planned merger with Vodafone's New Zealand arm if the transaction was approved by the Commerce Commission regulator.

It is common practice in New Zealand for companies to delay mergers after approval if a competitor - in this case, Spark - wants to appeal the decision to the Court of Appeal, giving the market clarity on the legality of the merger.

Local analysts said uncertainty around the Sky-Vodafone merger was driving Sky’s share price lower - Vodafone investors in London had reacted similarly when the merger plans were announced in 2016.

Both of the down under dollars were weaker, with the Kiwi last retreating 0.27% to NZD 1.3903 against the greenback, and the Aussie weakening 0.26% to AUD 1.3030 per $1.