20160720-三星证券-Perspectives_Weekly__Expectations_of_further_easing_to_weaken_18页_934kb

Samsung Market Strategy Summary

Core Content

This document outlines the current market strategy from Samsung Securities, focusing on the performance and outlook of both the Korean and global markets. It discusses the impact of monetary policy expectations, sector valuations, earnings forecasts, and fund flows on market dynamics. The report also provides a list of top picks for investment in various sectors, along with detailed financial forecasts.

Main Points

• Global Market Outlook:

  • Global equity and bond markets, especially emerging markets (EMs), have seen rallies due to expectations of policy responses to Brexit and improving economic indicators.
  • The recent decline in government bond yields was driven by these expectations, but with market stability returning, central banks have become less aggressive, leading to a rebound in yields.
  • There is a gradual weakening of expectations for further monetary easing, and the recent increase in bond market volatility is expected to impact the stock market.
  • While the US bond yields have risen, the likelihood of a market tantrum similar to past events is low due to the Fed's cautious approach and policy responses from major central banks.
  • For stock markets to continue rallying, there needs to be confirmation of earnings turnarounds, not just expectations.

• Korean Market Outlook:

  • Korean markets are undervalued compared to US markets.
  • The IT sector is expected to benefit from the rebound in advanced economies, while other sectors like steel, shipbuilding, energy, and chemicals require restructuring and industry turnarounds.
  • The pharmaceutical sector is currently overvalued.
  • Capital inflows into Korean equity and bond funds have improved, but there have been net outflows from Korean equity funds following a recent market rally.

• Sector Valuations and Fundamentals:

  • MSCI Korea sectors are trading at attractive P/B multiples, with the IT sector showing strong forward P/E and P/B.
  • The energy sector has shown positive total returns, while the chemical and steel sectors have seen mixed results.
  • The financials sector has shown varied performance, with banks and insurance companies facing challenges in earnings growth.

• Earnings Forecast Changes:

  • EPS forecasts for large-cap stocks have seen positive changes, with Samsung Electronics and SK Materials leading.
  • Mid-sized and small-cap stocks also show mixed EPS forecast changes, with some companies experiencing declines.
  • Investors are advised to wait for confirmation of earnings improvements before making further investments.

• Fund Flows:

  • Global fund flows have seen a net outflow, with EMs and Asia Pacific markets showing mixed trends.
  • Domestic fund flows have been negative, with equity-type and domestic-invested funds experiencing outflows.
  • Kospi investors, particularly foreign investors, have shown net inflows in recent weeks, though domestic institutions and individuals have been net outflows.

Key Information

• Monetary Policy Impact: The expectations of further monetary easing have influenced bond yields and stock market sentiment, but this trend is expected to weaken as central banks become more cautious.
• Earnings Expectations: Earnings forecasts are not yet stable, and the market is advised to wait for actual earnings improvements before engaging in further buying.
• Sector Performance: The IT sector is the most promising in Korea, while other sectors like steel, shipbuilding, and energy require restructuring and signs of recovery.
• Valuation Metrics: Korean markets are undervalued relative to US markets, and MSCI Korea sectors are trading at attractive P/B ratios.
• Investment Picks: The report highlights top stocks across various sectors, including Samsung Electronics, KT&G, and Hyundai Mobis, with detailed financial forecasts.

Market Calendar

• The document includes a market calendar, though it is not fully detailed in the provided text. It is likely used to track key economic indicators and policy events affecting market trends.

Conclusion

The strategy briefing emphasizes the need for caution in market investments, as sentiment-driven rallies are expected to be limited. Investors are advised to wait for confirmation of earnings improvements and to monitor the evolving economic and policy landscape closely.