"Buying Sectors with Strong Corporate Bond Performance... Recommended: Automobile, Aviation, Food & Beverage"

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[Asia Economy Reporter Hwang Yoon-joo] As concerns over declining corporate earnings in the second half of the year grow, advice has emerged that bond investment strategies should be established by industry. It is considered safer to invest mainly in industries expected to maintain favorable earnings.

On the 18th, Korea Investment & Securities stated, "Industries such as automobiles, aviation, food and beverage, and shipbuilding from a medium-term perspective, which are expected to maintain favorable earnings, should be actively considered for purchase." Along with this, they analyzed, "Defensive industries like telecommunications services and city gas, which are expected to maintain stable earnings even during an economic slowdown, should also be prioritized for purchase."

The outlook for industries and corporate earnings in the second half is not bright, as an economic slowdown phase is expected. Kim Ki-myung, a researcher at Korea Investment & Securities, pointed out, "In the second half, many industries are expected to see a decline in corporate earnings. Credit rating agencies mention that the upward momentum for credit rating upgrades is weakening and that industries may face unfavorable business environments."

However, although earnings in many industries may decline, the extent of the decline is not expected to be significant. This is because credit ratings tend to lag behind earnings for a considerable period. Researcher Kim predicted that despite the downward trend in corporate earnings, there will be no shift toward a downgrade trend in credit ratings during the second half of this year.

He advised, "Even if earnings are expected to slow, industries that have sufficiently secured financial buffers through recent boom periods should be prioritized for purchase. These include refining, steel, and shipping industries."

On the other hand, industries with significant earnings declines or concerns over increased competition require a cautious approach.

Researcher Kim analyzed, "This applies to petrochemicals focused on general-purpose products and retail distribution industries. Semiconductor, auto parts, and display industries, which were expected to see a turnaround in earnings in the second half, are likely to continue experiencing earnings weakness contrary to expectations."

However, top-tier companies within semiconductor and auto parts industries possess sound financial stability, so the possibility of rating issues arising is considered limited. He added, "With credit spreads (interest rate differences between corporate bonds) having expanded to historic levels, almost all credit bonds offer sufficient interest rate appeal, but selective purchasing based on relative interest rate levels within the same rating is necessary."

This content was produced with the assistance of AI translation services.