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Samsung Boss Indicted for Bribery, Embezzlement

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  • Samsung Boss Indicted for Bribery, Embezzlement

The heir to the Samsung empire, Lee Jae-Yong and four other top executives were indicted Tuesday on multiple charges including bribery and embezzlement, South Korean prosecutors said in the latest blow to the world’s biggest smartphone maker.

The AFP reported that the presentation of formal charges against Lee Jae-Yong and his colleagues makes them almost certain to face trial, casting new uncertainty over South Korea’s biggest business group as it seeks to recover from a humiliating recall.

As well as charges of bribery, embezzlement and hiding assets overseas, Lee is accused of perjury, said the spokesman for prosecutors probing a corruption and power abuse scandal that has seen President Park Geun-Hye impeached.

Three of the five men — but not Lee, the vice-chairman of flagship subsidiary Samsung Electronics — resigned their positions, the conglomerate said.

The group said it was “dismantling” its Future Strategy Office, the coordinating body that oversees major decisions such as acquisitions or entering new business.

The move, described as a “reform plan”, was announced in a brief five-line statement emailed minutes after the indictment.

Under the scheme, each Samsung unit will be allowed to run more independently, a powerful group body handling government lobbying will be disbanded and decisions over donations will be made more transparent, it said.

But Chung Sun-Sup, the head of chaebol.com, a private watchdog forum on conglomerates, said: “It is yet to be seen whether this is another cosmetic measure aimed to divert public criticism.”

In the past, he told AFP, “Samsung has dissolved group-controlling organisations when it got caught in breach of laws, only to revive them afterwards under different names”.

The Lee family could be “expected to continue wielding power and influence over the whole group”, he added, although professionals might get a greater voice in operating each of its subsidiaries.

The tech giant, whose group revenues are equivalent to a fifth of the country’s GDP, is struggling to recover from the embarrassing recall crisis over its Galaxy Note 7 smartphone last year.

The PR disaster is partly blamed on the group’s top-down management style, in which each Samsung unit simply follows orders from the elite Future Strategy Office without question.

– Merger deal –

The corruption scandal centres on Choi Soon-Sil, who is accused of using her close ties with President Park to force local firms to “donate” nearly $70 million to non-profit foundations, money which Choi allegedly used for personal gain.

Samsung was the single biggest donor to the foundations. It is also accused of separately giving millions of euros to Choi to bankroll her daughter’s equestrian training in Germany.

The 48-year-old Lee, the scion of Samsung’s founding Lee family, has effectively been at the helm of the conglomerate since his father suffered a heart attack in 2014.

One of the policy favours which Lee allegedly sought from Park was state approval for a controversial merger in 2015 of two Samsung units seen as a key step to ensure a smooth power transfer to him.

The deal was opposed by many shareholders who said it had wilfully undervalued shares of one of the two firms. But it eventually went through after the national pension fund — a major Samsung shareholder — approved it.

A former welfare minister who had overseen the pension fund was charged with abuse of power last month for pressuring it to vote in Samsung’s favour.

Lee has denied all accusations.

Samsung Electronics shares closed up one percent on Tuesday, at 1,922,000 won per share.

Tuesday’s indictments came a day before the special prosecutors — who were appointed in December — were set to hand back the case to state prosecutors after the government rejected a request to extend their inquiry.

It would be up to the state prosecutors to probe other South Korean conglomerates, including Hyundai Motor and retail giant Lotte Group, the special prosecutors’ spokesman said.

During their term they indicted a total of 31 suspects — 17 of them on Tuesday — including an ex-arts minister and former presidential chief of staff.

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Businessinsider, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

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Oil Prices Slide on China Demand Concerns, Brent Falls to $83.73

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Oil prices declined on Tuesday for the third consecutive day on growing concerns over a slowing Chinese economy and its impact on global oil demand.

Brent crude oil, against which Nigerian oil is priced, dipped by $1.12, or 1.3% at $83.73 a barrel, while U.S. West Texas Intermediate (WTI) crude dropped $1.15, or 1.4%, to close at $80.76.

The dip in oil prices is largely attributed to disappointing economic data from China, the world’s second-largest economy.

Official figures revealed a 4.7% growth in China’s GDP for the April-June period, the slowest since the first quarter of 2023, and below the forecasted 5.1% growth expected in a Reuters poll.

This slowdown was compounded by a protracted property downturn and widespread job insecurity, which have dampened fuel demand and led many Chinese refineries to cut back on production.

“Weaker economic data continues to flow from China as continued government support programs have been disappointing,” said Dennis Kissler, Senior Vice President of Trading at BOK Financial. “Many of China’s refineries are cutting back on weaker fuel demand.”

Despite the bearish sentiment from China, there is a growing consensus among market participants that the U.S. Federal Reserve could begin cutting its key interest rates as soon as September.

This speculation has helped stem the decline in oil prices, as lower interest rates reduce the cost of borrowing, potentially boosting economic activity and oil demand.

Federal Reserve Chair Jerome Powell noted on Monday that the three U.S. inflation readings over the second quarter “add somewhat to confidence” that the pace of price increases is returning to the central bank’s target in a sustainable fashion.

This has led market participants to believe that a turn to interest rate cuts may be imminent.

Also, U.S. crude oil inventories provided a silver lining for the oil market. According to market sources citing American Petroleum Institute figures, U.S. crude oil inventories fell by 4.4 million barrels last week.

This was a much steeper drop than the 33,000 barrels decline that was anticipated, indicating strong domestic demand.

The International Monetary Fund (IMF) also weighed in, suggesting that while the global economy is set for modest growth over the next two years, risks remain.

The IMF noted cooling activity in the U.S., a bottoming-out in Europe, and stronger consumption and exports for China as key factors in the global economic landscape.

In summary, while oil prices are currently pressured by concerns over China’s economic slowdown, the potential for U.S. interest rate cuts and stronger domestic demand for crude are providing some support.

Market watchers will continue to monitor economic indicators and inventory levels closely as they gauge the future direction of oil prices.

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OPEC+ Production Cuts Set to Balance Global Oil Market, Says Russian Deputy PM

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In a statement on Monday, Russian Deputy Prime Minister Alexander Novak expressed confidence that the global oil market will achieve balance in the second half of 2024, thanks to the production cut strategies implemented by the Organization of the Petroleum Exporting Countries and its allies, collectively known as OPEC+.

OPEC+, which includes major oil-producing countries such as Saudi Arabia and Russia, has been actively managing oil output to stabilize the market since late 2022.

In their most recent meeting on June 2, the group agreed to extend their latest production cut of 2.2 million barrels per day (bpd) until the end of September. This cut is scheduled to be gradually phased out starting in October.

“The market will always be balanced thanks to our actions,” Novak stated, emphasizing the importance of the coordinated efforts by OPEC+ in maintaining market equilibrium.

The U.S. Energy Information Administration (EIA) recently projected that global oil demand will surpass supply by approximately 750,000 bpd in the latter half of 2024 due to the continued reduction in OPEC+ output.

This outlook was echoed in a report by OPEC last week, which highlighted an anticipated oil supply deficit in the coming months and into 2025.

Novak’s remarks come at a crucial time for the global oil market, which has experienced significant volatility over the past year.

The OPEC+ alliance has been pivotal in mitigating some of this instability by adjusting production levels in response to fluctuating demand and other market dynamics.

Analysts suggest that the measures taken by OPEC+ will play a vital role in ensuring that the oil market remains stable as the world continues to navigate economic uncertainties and fluctuating energy demands.

The production cuts are expected to support oil prices by limiting supply, thereby helping to balance the market.

The impact of these production cuts is already being felt, with oil prices showing signs of stabilization.

However, the market remains sensitive to geopolitical developments and economic trends, which could influence future supply and demand dynamics.

As OPEC+ prepares to unwind some of its production cuts in the coming months, industry observers will be closely monitoring the market’s response.

The gradual phasing out of the cuts is designed to prevent any sudden shocks to the market, allowing for a smoother transition and sustained balance.

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Oil Prices Steady Amid U.S. Political Uncertainty and Middle East Tensions

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Oil prices held firm on Monday as the political uncertainty in the United States and ongoing tensions in the Middle East persist.

Brent crude oil, against which Nigerian oil is priced,  fell slightly by 13 cents, or 0.2%, to $84.90 a barrel after a 37-cent drop on Friday.

Similarly, U.S. West Texas Intermediate crude stood at $82.15 a barrel, down 6 cents, or 0.1%.

The dollar’s strength, which followed a failed assassination attempt on U.S. presidential candidate Donald Trump, exerted some pressure on oil prices.

A stronger dollar typically makes oil more expensive for buyers using other currencies, leading to reduced demand.

“I don’t think you can ignore the uncertainty that the weekend’s assassination attempt will cast across a deeply divided country in the lead-up to the election,” said Tony Sycamore, market analyst at IG.

In the Middle East, efforts to end the Gaza conflict between Israel and Hamas stalled over the weekend.

Talks were halted after three days, although a Hamas official indicated that the group had not withdrawn from discussions.

The situation escalated further when an Israeli attack targeting a Hamas military leader killed 90 people on Saturday, maintaining the geopolitical premium on oil.

Despite these geopolitical tensions, oil markets remain supported by supply cuts from OPEC+. Iraq’s oil ministry has pledged to compensate for any overproduction since the beginning of the year, reinforcing the market’s stability.

Last week, Brent fell more than 1.7% after four weeks of gains, while WTI futures slid 1.1%. The decline was largely attributed to a fall in China’s crude imports, which countered robust summer consumption in the United States.

“While fundamentals are still supportive, there are growing demand concerns, largely emanating from China,” noted ING analysts led by Warren Patterson.

China’s crude oil imports fell 2.3% in the first half of this year to 11.05 million barrels a day, with disappointing fuel demand and reduced output by independent refiners due to weak profit margins.

Also, crude throughput at Chinese refineries dropped 3.7% in June from a year earlier to 14.19 million barrels per day, marking the lowest level this year, according to customs data.

China’s economy has slowed in the second quarter, weighed down by a protracted property downturn and job insecurity, keeping alive expectations that Beijing will need to implement more stimulus measures.

In the United States, the active oil rig count, an early indicator of future output, fell by one to 478 last week, marking the lowest level since December 2021, according to energy services firm Baker Hughes.

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