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Experts share stock tips for contracting markets

Dec 04,2008
The stock market’s daily gyrations are leaving many investors wondering which stocks will be profitable in falling markets. Brokerages are giving company criteria to look for when investing in troubled times.

High dividends

Many brokerages recommend dividend stocks, or stocks that pay high dividends at the end of each year.

Besides the cash they will receive in dividend payments, those holding the stocks enjoy additional benefits. The share prices of dividend stocks may rise if more people buy them aiming for dividend profits. LIG Investment and Securities recommended dividend stocks that have higher-than-average expected dividend yield ratios.

Low short-term debt

A company with a lot of debt, no matter how profitable its business plan, keeps investors from buying its shares. Shinyoung Securities recommends companies that have low short-term ratios of liabilities to assets.

Short-covering

The more than 7 percent surge on the benchmark Kospi last week was largely attributed to foreign buying worth 449.5 billion won ($306.1 million). Foreigners are buying partly to cover short sales. Earlier this year, they sold many local stocks in a short-selling scheme - the selling of borrowed stocks on expectation they will fall further.

If the prices fall as expected, they buy them back and return them to the original owners, pocketing the difference. Daishin Securities recommended stocks that are being used heavily in short-covering.

Stable profit

Samsung Securities recommended companies expected to retain stable profits. Energy, food and paper makers fit the bill as they benefit from falling raw material prices. Insurance and education service providers were also recommended as they are considered recession-resistant.


By Choi Hyeon-chul JoongAng Ilbo [joe@joongang.co.kr]


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