20160427-三星证券-Perspectives_Weekly_Don_t_read_too_much_into_rebound_19页_1mb

Samsung Market Strategy Summary

Core Content

This document outlines the current market strategy and analysis for the Korean stock market and global markets as of April 27, 2016. It provides insights into investor behavior, sector performance, and market valuations, offering a strategic outlook on potential investments and market movements.

Main Points

• Foreign Investor Behavior:
  Foreign investors have shown a preference for Taiwan, India, and Korea over the past two months, primarily due to portfolio rebalancing. However, this does not indicate a long-term preference for Korean stocks.
  Korea has attracted USD4.7 billion in net capital inflows, but this is significantly less than the USD14.3 billion net selling observed over the same period.
  The net buying in Korea is part of a broader trend where global capital is returning to Asian markets due to improved sentiment and policy responses in major economies.

• Market Uncertainties:
  Anticipation-driven market rallies are expected to continue, even though economic and earnings rebounds have not yet materialized.
  Uncertainties are likely to rise through the end of the second quarter (2Q) due to factors such as the US presidential elections and potential Fed rate hikes.
  The Korean market is seen as more optimistic compared to ex-Japan Asia and historical data, but caution is advised against over-optimism regarding 2Q results.

• Sector Performance:
  The domestic financial sector (banks, insurance, construction) has been rallying, with the banking sector reporting surprisingly solid 1Q results.
  The shipbuilding/machinery and energy/chemical sectors have underperformed due to restructuring concerns.
  The software and insurance sectors are considered attractively valued and are expected to show upside potential.

• Valuation Metrics:
  The Kospi is trading near the upper end of its three-year valuation band with a forward P/E of 11.1x.
  The MSCI Korea index is trading at a discount to MSCI Asia ex Japan, suggesting potential value.
  Forward EPS is more important for the Kospi than actual EPS figures, indicating that future earnings expectations are key.

• Top Picks:
  The summary highlights several stocks as top picks based on valuation and EPS forecast changes, including KCC, Hyundai Glovis, Korea Aerospace Industries, CJ CGV, and others.
  These stocks are evaluated based on their price targets, P/E, P/B, and EPS growth.

Key Information

• Market Valuation:

  • Kospi: 11.1x forward P/E
  • MSCI Korea: Discounted to MSCI Asia ex Japan
  • Forward EPS is more influential on the Kospi than trailing EPS.

• Fund Flows:

  • Global equity funds experienced net outflows, with Korea posting the largest net outflow since March 2015.
  • Domestic equity funds saw a significant exit of KRW814.6 billion over the week of April 14–20.
  • Korean stocks are included in global, emerging, and Asia ex Japan markets.

• Economic Outlook:

  • Economic and earnings rebounds in the region are expected to be delayed.
  • Oil prices are stable, but the outcome of the US rate hike cycle and Brexit could influence market sentiment.
  • The US inflation expectations are closely monitored, with potential impacts on the Fed's policy decisions.

• Stock Screening:

  • Large-cap stocks with significant EPS forecast changes include Samsung Electronics, SK Hynix, and others.
  • Mid-sized and small-cap stocks also show varying EPS forecast changes, with some experiencing positive changes and others negative.

Market Calendar

• The document includes a market calendar, indicating key dates and events that may influence market dynamics.
• These events are critical for investors to monitor, including the BOJ monetary policy meeting and the FOMC meeting in June.

Strategic Recommendations

• Investors are advised to use corrections in 2Q to gradually accumulate positions in the Korean market.
• The report suggests a cautious approach to the 2Q results, as economic and earnings rebounds are not yet evident.
• The focus is on identifying undervalued sectors and stocks with positive EPS forecast changes.

Conclusion

The Korean stock market is currently influenced by foreign investor flows and macroeconomic factors, with a cautious outlook for the remainder of the year. Investors are encouraged to monitor sector fundamentals and use market corrections as opportunities to build positions in attractively valued stocks. The document emphasizes the importance of forward-looking metrics and highlights the need for a balanced approach to market participation.