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Samsung shares steady ahead of court decision over possible arrest warrant for chief Jay Y. Lee

Samsung shares steadied in afternoon trade on Wednesday, ahead of a decision from Seoul's central district court on whether to approve an arrest warrant for the scion of one of South Korea's largest family run conglomerates, known locally as chaebols.

Lee Jae Yong of Samsung group vice chairman arrives during the President political scandal parliament hearing at national assembly in Seoul, South Korea.
Seung-il Ryu | NurPhoto | Getty Images
Lee Jae Yong of Samsung group vice chairman arrives during the President political scandal parliament hearing at national assembly in Seoul, South Korea.

Jay Y. Lee, the chief of Samsung Group, was questioned behind closed doors by a judge on Wednesday to decide whether he should be arrested over his alleged role in a corruption scandal and a decision may not come until after midnight local time, according to Reuters.

Samsung Group steadied in Wednesday afternoon trade, ahead of the court decision. Samsung Electronics was up 0.2 percent at 1,851,000 won, Samsung SDI fell 0.4 percent, Samsung C&T down 1.6 percent and Samsung Engineering advanced 1.4 percent.

The Korean won weakened relatively against the dollar, with the dollar/won pair hitting an intraday high of 1,167.20, up from its last close at 1,159.83. At 1:08 p.m. HK/SIN, the pair traded at 1,166.20.

South Korean investigators have accused Lee of paying bribes amounting to as much as 43 billion won ($36.42 million) to Choi Soon-sil, a friend of president Park Geun-hye, who has been at the center of a corruption and influence-peddling scandal.

If the arrest warrant is issued, Lee will likely be detained, pending an investigation that could lead to his indictment and imprisonment if convicted on bribery, embezzlement and perjury charges, according to analysts at Eurasia Group in a note.

Reuters reported that Lee was accused of embezzlement and perjury in the prosecution's application for an arrest warrant and that investigators were looking into whether Samsung provided donations to a business and foundations backed by Choi in exchange for the South Korean national pension fund's support for a 2015 merger between Samsung C&T and Cheil industries.

Samsung has denied accusations of lobbying to push through the merger, according to Reuters, but acknowledged providing funds to three institutions.

Some analysts are, however, skeptical that a warrant could lead to an eventual arrest for Lee.

Daniel Yoo, head of global strategy and research at Kiwoom Securities in Seoul, told CNBC's "Street Signs" on Tuesday that it would be difficult for prosecutors to establish a clear connection between the donations given to Choi and the mega mergers between the companies.

"The corporate governance issue for the chaebol companies have been around for the last 50 years," he added.

Indeed, Lee's father, Lee Kun-hee, who has mostly been out of the public eye since a 2014 heart attack, was given a three-year suspended jail sentence in 2008 for tax evasion, but was later pardoned.

But given the fact that last year South Korea's parliament voted to impeach President Park, including some members of her own conservative Saenuri Party, the precedence set this time could be different.

It could provide further "incentives for politicians, especially those who hope to replace Park in an election this year, to intensify efforts to bring the chaebols to heel," Eurasia Group noted.

— Reuters contributed to this report.

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