20160401-三星证券-Earnings-based_rally_hard_to_see_16页_1mb

Samsung Model Portfolio Summary (April 2016)

Core Content

The Samsung Model Portfolio for April 2016 outlines a conservative investment strategy in response to the anticipated weak performance of the Korean stock market due to 1Q earnings concerns and uncertainties in the second quarter. The portfolio is designed to reflect the current market conditions, focusing on sectors with positive earnings momentum and defensive stocks.

Main Viewpoints

• Market Outlook: The stock markets globally showed a steady rise in March, but the Korean market underperformed the Kospi by 153 basis points. The outlook for April suggests that an earnings-based rally is difficult to see, with limited upside due to uncertainties in 2Q, including potential US rate hikes and a Brexit poll in June.
• Conservative Strategy: A conservative approach is recommended at the start of the earnings season, with a focus on large caps, value stocks, and defensive stocks. The portfolio beta is adjusted to 0.99, reflecting a more cautious stance compared to March's 1.05.
• Earnings Expectations: The export sector is expected to negatively impact 1Q earnings, with EPS forecasts falling more sharply than in the previous five years. The market is anticipating a bottom in earnings for the first quarter.
• Kospi Target Range: The target range for the Kospi in April is set at 1,900-2,000.

Key Portfolio Changes

• Added Companies: The portfolio includes new additions such as Korea Zinc, Kepco, Lotte Chemical, SK Chemicals, Soulbrain, Kia Motors, CJ CheilJedang, Shinhan Financial Group, SK Materials, and SK Innovation.
• Removed Companies: Companies such as Posco, Kogas, Korea Aerospace Industries, Donga ST, SFA Engineering, Kolao Holdings, CJ E&M, and Korea Investment Holdings are deleted from the portfolio.
• Sector Adjustments: The exposure to consumer staples, energy, financials, and IT is increased by 1% point each, while exposure to consumer discretionary and industrial goods is decreased by 2% points each. The portfolio is OVERWEIGHT on consumer discretionary, energy, and materials, and UNDERWEIGHT on consumer staples, financials, and IT.

Portfolio Weightings by Sector

Portfolio Changes

Added

• Korea Zinc (4%)
• Kepco (4%)
• Lotte Chemical (3%)
• SK Chemicals (3%)
• Soulbrain (3%)
• Kia Motors (2%)
• CJ CheilJedang (2%)
• Shinhan Financial Group (2%)
• SK Materials (2%)

Removed

• Posco (4%)
• Kogas (4%)
• Korea Aerospace Industries (3%)
• Donga ST (3%)
• SFA Engineering (3%)
• Kolao Holdings (2%)
• CJ E&M (2%)
• Korea Investment Holdings (2%)

Increased

• Samsung Electronics (1%)
• SK Innovation (1%)
• Hyundai Glovis (1%)
• SM Entertainment (1%)
• Mirae Asset Securities (1%)

Reduced

• AmoreG (1%)
• LG Electronics (2%)
• LG Chem (1%)
• KCC (1%)
• CJ CGV (1%)

Summary of Key Sectors

• Energy: Strong relative performance and positive earnings momentum.
• Chemicals: Strong relative performance and positive earnings momentum.
• Financials: Positive relative performance, but underweighted in the portfolio.
• IT: Underweighted in the portfolio due to lackluster earnings momentum.
• Materials: Positive relative performance and earnings momentum.
• Consumer Discretionary: Increased exposure due to positive earnings momentum.
• Consumer Staples: Reduced exposure due to lower performance and expectations of a bottom in earnings.
• Industrial Goods: Reduced exposure due to weak performance.

Conclusion

The Samsung Model Portfolio for April 2016 emphasizes a conservative approach, adjusting sector weights based on earnings momentum and market sentiment. It highlights the importance of focusing on sectors with positive earnings momentum and defensive stocks to mitigate the impact of potential 1Q earnings weakness and 2Q uncertainties. The portfolio aims to balance risk and reward in the context of a range-bound market outlook.