20160525-三星证券-Perspectives_Weekly__Manufacturing_rebound_key_to_global_rally_19页_1mb

Samsung Market Strategy Summary

Core Content

This document outlines the current market strategy for Samsung, focusing on both Korean and global stock markets. It discusses sector performance, valuations, earnings forecasts, and fund flows, highlighting the importance of manufacturing recovery in driving global stock market performance.

Main Points

Korean Stock Markets

• Sector Valuations: Several sectors, including shipbuilding/machinery, steel, energy, chemical, and software, are attractively valued with P/B multiples below 1x, despite rising EPS forecasts.
• Performance: Energy, utilities, consumer staples, and software sectors have outperformed the market over the past three months.
• Earnings Surprises: In Q1, the earnings surprise ratio reached 41.8%, with 60.2% of firms reporting in-line or better-than-expected results. However, concerns remain about the sustainability of these results due to reliance on cost-cutting and won depreciation.
• Fund Flows: Global equity funds experienced net outflows, while regionally-diversified global and Asia Pacific funds recorded net gains. Domestic equity funds saw a net exit for an eleventh consecutive week. Foreign investors have been net sellers in Korea since May.

Global Markets

• Earnings and Valuations: Earnings forecasts have risen in Korea and the US. The US is overvalued, while Korea is undervalued. China and Japan have weak earnings prospects and undemanding valuations, with China facing a growing debt issue and Japan struggling with a strengthening yen and low consumption.
• Market Performance: Korea and the US have outperformed global markets, with Korea showing particularly strong results. European markets have performed poorly due to issues such as financial support delays for Greece, Brexit, and immigration concerns.

Key Information

Sector Fundamentals (MSCI Korea)

• Energy: Total return of 24.0% over 12 months, with a forward P/E of 8.1 and forward P/B of 0.9.
• Materials: Total return of 2.2%, forward P/E of 10.3, and forward P/B of 1.1.
• Industrials: Total return of 18.7%, with forward P/E of 9.5 and forward P/B of 0.5.
• Consumer Staples: Total return of 14.4%, forward P/E of 22.2, and forward P/B of 34.3.
• Financials: Total return of 12.2%, forward P/E of 10.7, and forward P/B of 11.1.
• IT: Total return of 14.4%, forward P/E of 10.7, and forward P/B of 11.1.

Stock Screening: EPS Forecast Changes

• Large Caps: Top stocks include KCC, Hyundai Glovis, Korea Aerospace Industries, CJ CGV, and others with significant EPS forecast increases.
• Mid-sized Caps: Stocks like NHN Entertainment, Hyundai Mipo Dockyard, and LS Corporation show strong EPS growth.
• Small Caps: Companies such as Gamevil, Able C&C, and Hansol Chemical have notable EPS forecast increases.

Market Valuations

• MSCI Korea: Forward P/E is 10.2, forward P/B is 0.9, and forward ROE is 8.9%.
• Kospi: Forward P/E is 13.1, forward P/B is 4.7, and forward ROE is 10.7%.
• Kosdaq: Forward P/E is 10.7, forward P/B is 11.1, and forward ROE is 10.5%.

Fund Flows

• Global Fund Flows: Net outflows for GEM and Asia ex Japan, while global and Asia Pacific funds had net inflows. Total global fund flows were negative, with significant outflows from emerging markets.
• Domestic Fund Flows: Domestic equity funds saw net outflows, with equity-type and domestic-invested funds experiencing the largest exits. Bond-type and MMF funds had net inflows.

Conclusion

The strategy highlights the importance of manufacturing recovery in driving global stock market performance, particularly in the US. Korean markets show strong valuations in certain sectors, but fund flows indicate continued net selling by foreign investors. Domestic fund flows are mixed, with net outflows for equity funds and inflows for bond funds. The document suggests that while Korean markets may be undervalued, global performance will depend on economic recovery and improved manufacturing sectors.