20160420-三星证券-Perspectives_Weekly_18页_1mb

Samsung Market Strategy Summary

Core Content and Key Insights

This document outlines the current market strategy from Samsung Securities, focusing on both the Korean and global stock markets. It highlights the cautious outlook for equity markets due to lingering uncertainties and mixed economic indicators, while identifying potential opportunities for investment in specific sectors.

Main Points

• Market Sentiment: Major markets are approaching 2015 peaks, and investor sentiment is waning. The AAII Investor Sentiment Survey indicates a high percentage of neutral investors, suggesting a lack of strong bullish or bearish views.
• Bearish Sentiment: Has subsided due to monetary policy measures, commodity price rebounds, and the US Fed delaying rate hikes.
• Bullish Sentiment: Has also waned, mainly due to weak corporate earnings and mixed global macroeconomic indicators.
• Uncertainties in 2Q: Oil price volatility, Fed rate hike timing disputes, and the UK's Brexit referendum are expected to limit risk appetite.
• Oil Prices: Although major oil producers failed to agree on output freezes, oil prices are unlikely to fall below USD30/bbl. This has eased concerns over emerging markets and increased inflation expectations.
• Economic Indicators: Despite policy responses, G10 economic indicators have not improved as expected. Emerging markets, particularly Korea, are relatively performing well, driven by Chinese economic strength and oil price increases.
• Korean Market Caution: Geopolitical risks, especially related to North Korea's potential nuclear test, suggest caution. Opportunities to accumulate shares are expected in the latter part of Q2 and early Q3.

Korean Stock Markets

Summary and Top Picks

• EPS Forecast Changes: The banking, insurance, construction, shipbuilding/machinery, and software sectors have seen steady increases in EPS forecasts, resulting in undemanding P/B multiples.
• Share Price Performance: Utilities, energy, construction, and shipbuilding/machinery sectors have shown strong share price performance. However, software, consumer staples, and insurance sectors have remained weak despite solid earnings momentum.
• Top 10 Picks: The table lists top picks based on valuation and growth potential, including companies like SK Innovation, KCC, Hyundai Development Co, Hyundai Glovis, GS Home Shopping, KT&G, KB Financial Group, Samsung Electronics, and others. Each entry includes current and target prices, market cap, and various valuation and growth metrics.

Sector Fundamentals

• MSCI Korea Sector Dashboard: Provides insights into total return, forward P/E, P/B, and ROE for various sectors. The Energy and Materials sectors show strong performance and positive EPS growth.
• Key Sectors: Energy, Materials, and Industrials are highlighted for their strong fundamentals, while IT and Software sectors have mixed performance.

Sector Valuations and Momentum

• P/B Z-scores and EPS Forecast Changes: The US is overvalued relative to the MSCI AC World Index. Japan and the eurozone show declining earnings momentum, while Korea's earnings momentum has been rising.
• Valuation Trends: The Korean market is still considered undervalued compared to the global index. The P/B and P/E ratios indicate varying levels of valuation attractiveness across sectors.

Stock Screening and EPS Forecast Changes

• Large Caps: Top 10 stocks with positive EPS forecast changes include LG Display, Posco, LG Electronics, Kakao, and Samsung Electronics. Bottom 10 include stocks with negative EPS forecast changes.
• Mid-sized Caps: Top 10 and bottom 10 stocks are listed with their EPS forecast changes, showing a mix of positive and negative trends.
• Small Caps: Top 10 and bottom 10 stocks are also listed, with similar mixed EPS forecast changes.

Market Valuations

• Forward P/E and P/B: The document includes charts for MSCI Korea and Kospi, highlighting their forward P/E and P/B ratios. These metrics suggest varying valuations across the market.

Fund Flows

• Global Fund Flows: Net flows and assets are detailed for various regions, including EMs, Asia ex Japan, Latin America, and others. The total fund flows show a net outflow, with EMs and Asia ex Japan experiencing significant outflows.
• Domestic Fund Flows: Net fund flows for Korean markets are presented, showing a net outflow from equity-type and domestic-invested funds. Mixed-type and bond-type funds show different trends.

Global Stock Markets

• Relative P/B Z-scores: The US is overvalued compared to the MSCI AC World Index, while Japan and the eurozone have seen declines in earnings momentum.
• Market Performance: Major stock markets rallied in anticipation of an oil production freeze agreement but lost momentum after OPEC talks in Doha collapsed. The Japanese market also pulled back following a statement from US Treasury Secretary Jacob Lew.

Market Calendar

• The document references a market calendar, though the content is not fully provided. It suggests upcoming market events and potential impacts on investor sentiment and market performance.

Key Information

• Investor Sentiment: Neutral sentiment is high, with investors not favoring either bullish or bearish views.
• Geopolitical Risks: North Korea's potential nuclear test and the end of US-Korea military drills could increase tensions.
• Earnings Momentum: Korea's earnings momentum has been improving, but global indicators remain mixed.
• Oil Price Outlook: Prices are unlikely to fall significantly, which has a positive impact on emerging markets.
• Market Valuation: The Korean market is undervalued relative to the global index, offering potential for accumulation.

Conclusion

The strategy briefing suggests a cautious approach to the stock market due to lingering uncertainties and mixed economic indicators. While the Korean market shows promise, especially in the latter part of Q2 and early Q3, investors should be mindful of geopolitical risks and the potential for market fluctuations. The document provides a detailed analysis of sector fundamentals, valuations, and fund flows, aiding in informed investment decisions.