20160427-三星证券-Perspectives_Weekly：Don’t_read_too_much_into_rebound_20页_1mb

Samsung Market Strategy Summary

Core Content

This document provides a market strategy briefing from Samsung Securities, focusing on the performance and outlook of the Korean stock market and its global context. It outlines the current trends in foreign investment flows, sector valuations, and the implications of these movements for market participants.

Main Points

• Foreign Investor Activity: Over the past two months, foreign investors have shown a preference for Taiwan, India, and Korea, but this is attributed to portfolio rebalancing rather than an increased preference for Korean stocks. Korean stocks have attracted USD4.7 billion, while foreign investors have sold USD14.3 billion in the same period.
• Global Capital Flows: Global capital had exited Asian markets from May 2015 due to concerns over a US interest-rate hike and China's economic growth, but inflows have resumed since mid-February due to oil price rebounds and policy responses in major economies.
• Market Outlook: Anticipation-driven market rallies are expected to continue, although economic and earnings rebounds have not yet materialized. Uncertainties are likely to rise through the end of the second quarter (2Q).
• Kospi Valuation: The Kospi is currently trading near the upper end of its three-year valuation band with a forward P/E of 11.1x. While there is a broad end to declines since 2014, it is premature to expect full corporate earnings turnarounds.
• Sector Performance: The banking, insurance, construction, shipbuilding/machinery, and software sectors in Korea are attractively valued. However, the shipbuilding/machinery and energy/chemical sectors have faltered due to restructuring concerns.
• EPS Forecasts: Forward EPS is more important for the Kospi than actual EPS figures. There are notable revisions in EPS forecasts across various sectors, indicating potential for growth.
• Fund Flows: Global equity funds experienced net outflows, with Korea posting the largest outflow since March 2015. Domestic equity funds also saw significant outflows over the week of April 14-20.
• Market Valuations: MSCI Korea's forward P/E and P/B ratios are highlighted, along with comparisons to other markets. The Kospi and Kosdaq are shown with their respective valuations.
• Brexit Impact: Anxiety is rising ahead of the UK's June 23 vote to leave the EU, which could lead to increased risk aversion.
• Recommendation: Investors are advised to use corrections in 2Q to gradually accumulate positions, especially given the uncertainties surrounding the US presidential elections and potential rate hikes.

Key Information

• Kospi: Trading at 2,020, with a forward P/E of 11.1x, near the upper end of its 3-year valuation band.
• Foreign Investor Flows: Net buying in Korea over the past two months amounted to USD4.7 billion, while net selling reached USD14.3 billion over the same period.
• Sector Valuation: The software and insurance sectors are noted for potential upside due to their share-price momentum faltering.
• EPS Forecast Changes: Both large and mid-sized caps have seen changes in EPS estimates, indicating potential for future performance.
• Market Calendar: The document includes a market calendar with key dates and events affecting market dynamics.

Summary and Top Picks

• Top 10 Picks: Includes companies across various sectors such as materials, industrials, consumer, and financials, with details on current and target prices, EPS growth, and valuation metrics.
• Bottom 10 Picks: Also includes companies, with similar valuation and EPS data, highlighting potential undervalued stocks.

Market Valuations and Momentum

• Forward P/E and P/B: Detailed comparisons of forward P/E and P/B ratios across different sectors and indices, including MSCI Korea and Kospi.
• Valuation Metrics: The document highlights the importance of forward P/E and P/B in assessing market valuations.

Fund Flows

• Global Fund Flows: Data on net flows and assets for different regions, including EMs, Asia ex Japan, and others.
• Domestic Fund Flows: Breakdown of net flows and assets for different types of domestic investors, including equity-type, domestic-invested, and mixed-type funds.

Emerging Market Valuations

• Risk Appetite: EMs continue to see market rallies driven by anticipation, but the sustainability of this trend is uncertain due to the lack of economic and earnings rebounds.
• Oil Prices: Oil prices remain stable, but there is uncertainty about whether they will stay above USD40/bbl if US rate hike concerns increase.

Market Calendar

• Key Dates: Includes important market events and dates that could impact investor decisions and market trends.

Conclusion

The document emphasizes the importance of monitoring fundamentals and using corrections to accumulate positions, particularly in the Korean market, while also noting the broader implications of global and regional economic conditions on market performance.