20160420-三星证券-Perspectives_Weekly_19页_1mb

Samsung Market Strategy Summary

Core Content

This document outlines the market strategy and analysis from Samsung Securities, focusing on the performance and outlook of the Korean and global stock markets as of April 2016. It provides insights into investor sentiment, sector fundamentals, valuations, EPS forecasts, and fund flows, offering recommendations for investment opportunities and caution in certain areas.

Main Points

Market Sentiment and Uncertainties

• Major markets are approaching their 2015 peaks, and sentiment is waning.
• The AAII Investor Sentiment Survey indicates that a high percentage of investors are neutral, suggesting a retreat from both bullish and bearish views.
• Bearish sentiment has eased due to monetary policy measures, commodity price rebounds, and the US Fed delaying rate hikes.
• Bullish sentiment has declined mainly due to weak corporate earnings and mixed global macroeconomic indicators.
• Uncertainties in 2Q include oil price volatility, Fed rate hike timing, and the UK's Brexit referendum, which may limit risk appetite and prevent market rerating.

Korean Market Outlook

• The Korean market is undervalued relative to the MSCI AC World Index, despite mixed global macroeconomic indicators.
• Geopolitical risks, particularly from North Korea's potential nuclear test, may affect market stability.
• The document recommends caution and suggests opportunities to accumulate shares during the end of 2Q and early 3Q.

Sector Analysis

• Energy: EPS forecasts have been raised, leading to undemanding P/B multiples. Strong share-price performance.
• Materials: EPS forecasts have increased, but some sub-sectors like steel have shown mixed results.
• Industrials: Shipbuilding and construction sectors have shown strong share-price performance, while transportation has been weak.
• Consumer Discretionary: Share prices have been weak despite solid earnings momentum.
• Consumer Staples: Share prices have been relatively weak, but earnings momentum has been strong.
• Financials: Banks and insurance have shown mixed EPS forecast changes, with some sectors like insurance showing positive momentum.
• IT: Samsung Electronics is the top pick with strong EPS growth and forward P/E and P/B multiples.

Fund Flows and Market Valuations

• Global fund flows have been negative, with EMs and Asia ex Japan showing net outflows.
• Domestic fund flows have also been negative, with equity-type and domestic-invested funds showing outflows.
• MSCI Korea is undervalued compared to the MSCI AC World Index.
• The Korean market's forward P/E and P/B ratios are lower than the global average, indicating potential for growth.

Key Information

Top Picks for Korean Stocks

Fund Flows

• Global Fund Flows: Net outflows across EMs and various regions, with Asia ex Japan and EMs showing the most significant outflows.
• Domestic Fund Flows: Net outflows for equity-type and domestic-invested funds, with mixed performance among different fund types.

Market Valuations

• MSCI Korea: Forward P/E and P/B ratios are lower than the global average, indicating undervaluation.
• Kospi: Forward P/E and P/B ratios are also undervalued relative to global benchmarks.

EPS Forecast Changes

• Large Caps: Top performers include LG Display, Posco, and Samsung Electronics.
• Mid-sized Caps: Strong EPS growth in companies like Korean Air and Doosan Infracore.
• Small Caps: Companies like Asiana Airlines and Hanmi Semiconductor show positive EPS forecast changes.

Conclusion

The document emphasizes the cautious outlook for the stock market due to lingering uncertainties and weak corporate earnings, while highlighting potential opportunities in the Korean market, particularly in the energy, materials, and industrials sectors. It recommends reducing exposure to stocks due to limited upside and suggests accumulating shares in the latter half of Q2 and early Q3. The Korean market is viewed as undervalued compared to global indices, offering a potential entry point for investors.