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Samsung Model Portfolio Summary - July 2016

Core Content

This document outlines the performance and strategic adjustments of the Samsung Model Portfolio in July 2016, focusing on its relative performance against the Kospi index and the recommended changes to the portfolio structure in response to the Brexit referendum and global market uncertainties.

Main Points

• Market Context:
  The global stock markets were affected by the anticipation of the US Fed's next rate hike and Brexit-related concerns. The Brexit vote on June 23 caused a significant drop in European markets and others, but the UK and US markets were somewhat more resilient. The Kospi ended June down by 3.09%, while the Samsung Model Portfolio lost 0.51%, outperforming the Kospi by 15 basis points (bps).

• July Outlook:
  The impact of the Brexit shock is expected to continue through July. The initial negative effects typically concentrate within the first 30 to 60 days, with a full correction and recovery to pre-shock levels expected in about three months. However, current market valuations are much higher than those seen during previous shocks, so the recommendation is to wait for more attractive buying opportunities. The Kospi target range for July is set at 1,850–2,000.

• Trading Strategy:
  Investors are advised to take a conservative approach until uncertainties are resolved. The portfolio beta remains unchanged at 1.00. The focus is on sector exposure adjustments and stock selection changes.

Key Portfolio Changes

Sector Exposure Adjustments

Stock Picking Changes

Added to the portfolio:

• Cosmax
• NHN Entertainment

Removed from the portfolio:

• CJ CGV
• Kia Motors
• Soulbrain

Increased Exposure:

• KT&G
• Korea Zinc
• Hyundai Mobis
• Mirae Asset Securities
• Hyundai Motor

Reduced Exposure:

• Mando
• Shinsegae
• SK Telecom

Portfolio Weighting and Performance

The following table compares the sector weightings in the Samsung Model Portfolio with those of the Kospi:

Performance Review

• Relative Performance (July 2016):
  • Consumer Discretionary: Outperformed the Kospi by 8.3% (1m), 21.3% (3m), and 15.4% (12m).
  • Consumer Staples: Outperformed the Kospi by 9.1% (1m), 39.3% (3m), and (14.7)% (12m).
  • Financials: Outperformed the Kospi by 4.3% (1m), 20.5% (3m), and 45.0% (12m).
  • IT Hardware & Semiconductors: Outperformed the Kospi by 5.2% (1m), 13.8% (3m), and (1.2)% (12m).
  • Software & Services: Outperformed the Kospi by 6.4% (1m), (5.4)% (3m), and (24.3)% (12m).

Key Insights

• The Samsung Model Portfolio was conservative in its approach to market volatility, with a focus on sector rebalancing.
• Brexit-related shocks are expected to continue impacting markets, but long-term damage to the global macro environment is unlikely due to improved risk management in developed markets.
• The model portfolio recommends increasing exposure to consumer staples, financials, and materials and reducing exposure to consumer discretionary and telecom.
• The portfolio beta remains at 1.00, indicating a neutral stance on market volatility.
• Valuation levels are currently overvalued, and the recommendation is to wait for corrections before entering the market.

Conclusion

The Samsung Model Portfolio aims to navigate the Brexit-induced market volatility by maintaining a conservative approach, adjusting sector exposure, and fine-tuning stock selections. The target range for the Kospi is set at 1,850–2,000, and the portfolio is expected to outperform the market once attractive buying levels are reached.