20160114-三星证券-Stock_markets_correcting_worldwide_23页_998kb

Samsung Market Strategy Summary

Core Content

This document outlines Samsung's market strategy for 2016, focusing on both Korean and global stock markets. It provides insights into the current economic and market conditions, sector fundamentals, valuations, and momentum. The strategy emphasizes the need for cautious investment, highlighting potential opportunities in specific sectors and stocks.

Main Points

Global Market Outlook

• China's Economic Instability:

  • China's economic concerns are valid due to high corporate debt and real estate bubbles, but systemic risk is unlikely to trigger a financial crisis like the 1998 Asian crisis.
  • The country is expected to implement restructuring measures to address these issues.
  • Despite early market corrections, a financial crisis is not anticipated, and long-term volatility is likely due to structural challenges.

• US Markets:

  • US markets are expected to experience limited corrections this year, with a crash unlikely.
  • Technical and fundamental indicators suggest a possible market peak, with the spread between 5- and 10-year Treasuries indicating an imminent correction.
  • The S&P 500 may see a stagnation due to weak EPS growth and high debt levels.
  • The Fed's cautious rate-hike approach and ample liquidity are expected to limit market declines.

Korean Market Outlook

• Kospi P/B of 0.9x as Support Line:

  • The Korean stock market's P/B ratio of 0.9x is seen as a reliable support line, reflecting that corporate earnings have passed the worst.
  • The P/E ratio is near its historic average, suggesting a balanced market valuation.

• Sector Momentum and Valuation:

  • Energy, chemicals, consumer staples, insurance, and utilities sectors show positive momentum and valuations based on earnings improvements.
  • Auto and banking shares have sustained momentum, but uncertainties remain.
  • Kosdaq valuation burden has increased following an early-year rally.

• Stock Screening and EPS Forecasts:

  • EPS forecasts are revised, with large, mid, and small-cap stocks showing varying degrees of change.
  • Some stocks are expected to see significant EPS growth, while others are projected to experience declines.

Key Information

Kospi Valuation and Earnings

• MSCI Korea net profit is forecasted to edge up to KRW85t in 2016, slightly lower than the 2015 consensus estimate of KRW89t.
• The consensus estimate includes a one-off gain at Kepco, so excluding this, the estimate would be KRW81t.
• The MSCI Korea net profit for 2015 is estimated at KRW86t, showing steady improvement from 2014's bottom of KRW70t.
• The index's P/B ratio is at a post-2009 bottom, indicating a potential support level.
• Market volatility is expected to remain high, but recent pullbacks are seen as excessive, suggesting a rebound in 1H2016.

Top Picks and Sector Performance

• Energy:

  • SK Innovation, LG Chemical, and others are highlighted for potential EPS growth.
  • EPS estimates for top stocks are positive, while some bottom stocks show declines.

• Chemicals:

  • LG Chem and Hanwha Chem are among the top performers.
  • EPS forecasts for these stocks are expected to increase.

• Consumer Discretionary:

  • Mando and CJ CGV are top picks, with positive EPS forecasts.
  • Retailing and Auto & Parts sectors show mixed performance.

• Consumer Staples:

  • Amorepacific and others are highlighted for EPS growth.
  • The sector's P/E and P/B ratios are relatively stable.

• Financials:

  • Samsung Fire and LG Household & Health Care are top picks.
  • Banks and insurance show mixed EPS forecasts.

• IT:

  • LG Innotek and NCsoft are top picks with positive EPS growth.
  • IT sector's valuation and momentum are favorable.

Market Calendar

• The document references a market calendar for 2016, indicating key dates and market events.

Conclusion

Samsung's market strategy for 2016 is cautiously optimistic, with a focus on the Korean market and global sectors. While concerns about China's economic slowdown and US market corrections are acknowledged, systemic risks are deemed unlikely. The document highlights the potential for rebounds in the Korean market and recommends expanding exposure to certain sectors and stocks, particularly those in energy, chemicals, consumer staples, and IT, based on improved earnings and valuations.