20160629-三星证券-Perspectives_Weekly__Supplementary_budget_to_impact_market_little_19页_1000kb

Samsung Market Strategy Summary

Core Content

This document outlines the market strategy analysis for the Korean and global markets, focusing on the impact of the 2016 supplementary budget, sector fundamentals, valuations, and fund flows. It is authored by Hyein Ok, Seung Min You, and DongYeol Moon, and provides insights into investment opportunities and market trends.

Main Points

Supplementary Budget Impact

• A KRW1ot supplementary budget is planned for the second half of 2016 to address economic risks and create jobs.
• The budget will be financed by this year's tax revenues and a KRW1.2t surplus from 2015, with no treasury bonds issued.
• Total projected stimulus for 2H is raised to KRW20t.
• The budget is expected to benefit the macroeconomic environment but may not have a significant impact on stock performance.
• The Korean market's relative performance to emerging markets has historically been mixed, with only four of seven supplementary budgets leading to outperformance in the six months following the announcement.
• The success of the budget may depend on the speed of approval by lawmakers.

Historical Context

• Supplementary budgets have generally boosted Korea's GDP growth over the past 25 years, except in 2000 and 2008, which were delayed due to lengthy legislative processes.
• The supplementary budget in 2009 was the largest to date, at KRW28.4t, and aimed at job creation and public welfare.
• Most of the budget allocations have been used to cover tax shortfalls rather than direct economic stimulus.

Sector Analysis

• The shipbuilding/machinery, steel, energy, and chemicals sectors are considered attractive with P/B ratios below 1x.
• Sector earnings momentum has remained stable, but increased sensitivity to global economic movements is a concern.
• Consumer discretionary, financials, and IT sectors have historically delivered higher returns following supplementary budgets.
• Defensive sectors like healthcare and consumer staples have shown minimal benefit from such budgets.

Market Volatility

• The Korean market has become less volatile compared to other emerging markets.
• This reduced volatility may limit the potential for rebounds in relation to other emerging markets.
• The document suggests that investors should not rely on budget expectations but should wait for a visible economic rebound before buying stocks.

Key Information

Budget Overview

• Amount: KRW1ot
• Funding Source: Tax revenues and KRW1.2t surplus from 2015
• Total Stimulus: KRW20t
• Purpose: Address domestic economic risks, support industries, and create jobs

Sector Performance (Past 6 Months)

• Consumer Discretionary: 27.3%
• IT: 2.4%
• Energy: 5.8%
• Materials: 12.3%
• Financials: 16.4%
• Healthcare: 15.4%
• Consumer Staples: 5.5%

EPS Forecast Changes

• Large Caps: Top stocks include Samsung Electronics, Hyundai Heavy Industries, and LG Display.
• Mid-sized Caps: Top stocks include LS Corporation, Doosan Infacore, and SK Chemicals.
• Small Caps: Top stocks include Doosan Engine, Wonik IPS, and Ecopro.

Market Valuations

• MSCI Korea: Forward P/E and P/B ratios are provided.
• Kospi and Kosdaq: Forward P/E and P/B data is also included.
• The document highlights the importance of valuations in assessing investment opportunities.

Fund Flows

• Global Fund Flows: Includes data on net flows and assets for various regions.
• GEM (Global Emerging Markets): Net flows of USD841m last week, with a 4-week average of USD501m.
• Asia ex Japan: Net flows of USD-892m last week, with a 4-week average of USD-509m.

Conclusion

The supplementary budget is expected to have a limited impact on the stock market, with the focus on macroeconomic support rather than direct stock performance. Investors are advised to monitor sector fundamentals and wait for a visible economic rebound before making investment decisions. The Korean market is less volatile, which may limit its relative performance compared to other emerging markets. The document provides a detailed analysis of sector valuations and EPS forecast changes, offering a comprehensive view of potential investment opportunities.