20160628-三星证券-Brexit_effects_Market_and_sector_Sentiment_and_forex_rates_in_the_spotlight_37页_1mb

Samsung Market Strategy Summary

Core Content

This document outlines the market strategy of Samsung Securities in response to the Brexit referendum on June 23, 2016, focusing on the potential impact on the Korean stock market and specific sectors. It provides analysis and investment recommendations based on historical market responses to similar shocks and current economic conditions.

Key Information

• Date: 2016. 6. 28
• Strategist: SeungMin You (strategist.you@samsung.com)
• Analysts:
  • Sokmo Yun (Construction)
  • MS Hwang (Tech)
  • JungHoon Chang (Rechargeable batteries, OLED, security services)
  • Sean Chang, CFA (Securities brokers, Insurance)
  • Ilwoo Yang (Leisure)
  • Eunkyung Park (Household goods, Transportation)
  • Youngho Kim (Transportation)
  • OJ Nam (Retail)
  • Jaewoo Kim (Banking)
  • Esther Yim (Autos & Auto parts)
  • Youngsoo Han (Shipbuilding)
  • Jaeseung Beak (Steel, Nonferrous metals)
  • Seungwoo Yang, CFA (Telecom, Media, Entertainment)
  • Jihae Yang (Utilities)
  • Rachel Lee (Apparel & other consumer goods)

Main Views

Market Outlook

• Kospi Support Levels:

  • First support level at 1,880 (0.87x P/B), with a 30% probability of reaching this level.
  • Second support level at 1,800 (0.84x P/B), with a 50% probability of reaching this level.
  • Third support level at 1,700 (0.79x P/B), with a 20% probability of reaching this level.

• Market Volatility:

  • Brexit effects are unpredictable, with potential for the Kospi to fall below the first support level during volatility spikes.
  • The market is expected to remain volatile for the next few months.

• Investment Strategy:

  • Increase cash exposure.
  • Focus on defensive, dividend, and value stocks.
  • Accumulate equities when the Kospi falls to its first or second support levels.

• Macro Scenario:

  • The likelihood of entering a bear market is slim.
  • Global financial markets are expected to stabilize, with central banks likely to implement further monetary easing.

Brexit Impact and Outlook

• Global Policy Coordination:

  • The focus is on the magnitude and content of global policy coordination following the Brexit vote.

• Sector-Specific Impacts:

  • Tech: Fundamentals are improving, with defensive characteristics.
  • Rechargeable batteries, OLED, Security services: Limited Brexit impact.
  • Construction: Restructuring has more effect than Brexit.
  • Leisure: Inbound-focused firms benefit from won depreciation.
  • Household goods: Sentiment is deteriorating, but long-term impact is negligible.
  • Retail: Domestic operations are largely safe from Brexit-related negatives.
  • Banking: Shares are expected to tumble.
  • Securities brokers: Focus should shift to structural changes.
  • Insurance: Impact is limited, but low interest rates pose a longer-term burden.
  • Transportation: Neutral on airlines, overweight on logistics.
  • Utilities: Won depreciation is negative, but oil prices have a diverging impact.
  • Autos & Auto parts: Likely impact on Korean players, with diverging auto shares.
  • Shipbuilding, Machinery: Order vacuum may extend.
  • Steel, Nonferrous metals: Deteriorating investor sentiment is a concern.
  • Telecom services: Attractive as defensive and dividend stocks.
  • Apparel: OEMs are expected to benefit.
  • Other consumer goods: Little near-term impact from Brexit.

Historical Context

• Major Shock Events:

  • The effects of major shocks (e.g., 9/11, Eurozone crisis, US credit downgrade) are typically concentrated in the first month or two.
  • The Kospi has historically had room to fall further due to higher valuations compared to past lows.

• Foreign Capital Movement:

  • Foreign capital is expected to remain risk-averse, with limited impact from UK and EU fund outflows on the Korean stock market.
  • Investment sentiment is negative for stocks with large exposure to Europe and the UK.

Sector Exposure Analysis

• Korean Exports:

  • UK Exposure: Limited, with the highest in shipbuilding (6.34%) and automobiles (3.3%).
  • EU Exposure: Higher in home electronics (15.3%), auto parts (15.7%), and shipbuilding (14.9%).

• Major Companies:

  • Securities: Companies like Hyundai Securities, NH Investment & Securities, and Samsung Life Insurance have significant exposure to European markets.
  • Shipbuilding & Mechanics: Hyundai Heavy Industries and Samsung Heavy Industries have high exposure to Europe.
  • Pharmaceuticals: Celltrion and Hanmi Pharm have exposure to European markets.
  • Leisure: Companies like Hana Tour Service and Mode Tour Network have exposure to European markets.
  • Apparel: Youngone has 33% exposure to European markets.

Investment Recommendations

• Tech Sector:

  • Focus on companies with strong fundamentals and the ability to generate earnings even in a slowing global economy.
  • Large caps: Samsung Electronics (SEC), SK Hynix, and Naver.
  • Small caps: CJ E&M, Wonik IPS, and NHN Entertainment.

• Rechargeable batteries/OLED/Security services:

  • Limited impact from Brexit, with a recommendation to accumulate OLED materials firms that are sidelined or expected to benefit from shipment growth.
  • Maintain BUY ratings on Samsung SDI and materials firms.

Summary Table

Conclusion

The document emphasizes the need for caution and strategic investment in the wake of Brexit, recommending a focus on defensive, dividend, and value stocks. It highlights that while the Brexit vote has caused initial volatility, the long-term impact is expected to be limited due to global policy coordination and the resilience of Korean markets. Sector-specific analysis suggests that some industries, like tech and construction, are more resilient, while others, such as autos and shipbuilding, may face challenges.