20161101-三星证券-Samsung_Model_Portfolio_Dissipating_uncertainties_vs_weak_earnings_16页_879kb

Samsung Model Portfolio Summary (November 2016)

Core Content

The Samsung Model Portfolio for November 2016 is a strategic investment guide that outlines the performance of the portfolio in October 2016, analyzes market uncertainties, and provides insights on sector allocation and stock selection. The portfolio outperformed the Kospi index, which was negatively impacted by a range of unexpected factors.

Main Views and Key Information

Market Overview (October 2016)

• Global stock markets remained range-bound in October, with a slowdown in the upward trend observed in September.
• The US market faced growing controversy over overvaluation, and the strengthening dollar was seen as a potential threat to corporate earnings.
• The Korean market, specifically the Kospi, experienced a dip due to:
  • The Galaxy Note 7 scandal, which led to a reduction in operating profit estimates.
  • Restrictions on Chinese visits to Korea by the Chinese government.
  • Political scandals affecting investor sentiment.
• The Samsung Model Portfolio declined by 1.48%, outperforming the Kospi by 26 basis points (bps).

November Outlook

• The US presidential election (Nov 8) is the main event expected to influence market movements in November.
  • Markets are largely in favor of Hillary Clinton, who supports fiscal expansion and corporate tax increases.
  • A Donald Trump victory could trigger a short-term shock due to increased uncertainty.
  • The results of the Congressional elections (also Nov 8) will be critical if Trump wins.
• In Korea, investors are losing hope in earnings improvement, especially in key growth sectors like cosmetics and bio/healthcare.
• The Kospi is expected to be more influenced by global risk appetite than domestic earnings.
• The Fed's expected rate hike in December may limit market catalysts, leading investors to focus on yield.
• Small- and mid-cap stocks, along with dividend plays, are recommended for focus in November.

Portfolio Strategy

• The portfolio maintains a conservative stance on the Kospi, with unchanged sector weightings and stock picks.
• Adjustments to stock weightings were based on:
  • 3Q earnings momentum
  • Valuations
  • Dividend yields
• The portfolio beta remains at 1.04, consistent with October.
• Exposure increases in the following sectors:
  • Consumer discretionary: from 14% to 16%
  • Financials: from 12% to 14%
  • Utilities: from 3% to 4%
• Exposure decreases in the following sectors:
  • Consumer staples: from 8% to 7%
  • Industrial goods: from 15% to 14%
  • IT: from 32% to 29%

Key Portfolio Changes

• Added: Mando
• Removed: Halla Holdings, Namuga
• Increased exposure to:
  • Hyundai Motor
  • Hyundai Heavy Industries
  • Samsung Fire & Marine
  • Hyundai Department Store
  • Hana Financial Group
  • Kogas
• Reduced exposure to:
  • Hyundai Development Co
  • Naver
  • Korea Aerospace Industries
  • AmoreG

Sector Weightings (November vs October)

Performance Review (October 2016)

Portfolio vs Kospi

• The Samsung Model Portfolio outperformed the Kospi by 26 bps in October.
• Sector allocation contributed 23 bps to the outperformance.
• Stock picking accounted for the remaining 3 bps.

Performance by Sector

• Consumer discretionary: outperformed by 3.1% (1m), 3.4% (3m), and (8.6)% (12m)
• Financials: outperformed by 5.6% (1m), 9.4% (3m), and (6.4)% (12m)
• Utilities: outperformed by 7.2% (1m), 8.7% (3m), and 7.5% (12m)
• Consumer staples: underperformed by (5.5)% (12m)
• Health care: underperformed by (16.6)% (12m)
• IT: underperformed by (22.0)% (12m)

Key Takeaways

• The portfolio maintains a conservative stance due to market uncertainties.
• Political and economic events in the US and Korea will significantly impact market sentiment.
• Earnings momentum in Korea is weak, especially in key industries.
• The portfolio beta remains stable, suggesting similar volatility to the Kospi.
• The focus is on yield, with an emphasis on small- and mid-cap stocks and dividend plays.
• Mando is added as a new stock, while Halla Holdings and Namuga are removed.

Conclusion

The Samsung Model Portfolio for November 2016 reflects a strategic shift toward consumer discretionary, financials, and utilities, with a reduction in exposure to IT and consumer staples. The portfolio's performance in October highlights its ability to outperform the Kospi, driven by sector allocation and selective stock picking. The US presidential election and Fed rate hike are the key drivers for market movement in November, with the Kospi expected to be influenced more by global risk appetite than domestic earnings.