The Tesla logo is seen at the company's store in Cherry Creek Mall, Denver on Feb. 9, 2019. Shares of Tesla tumbled Tuesday, Jan. 3, on the first full day of trading since the company announced 2022 delivery numbers that fell short of targets. AP-Yonhap

Investors depressed by bleak market outlook, soaring interest

By Lee Min-hyung

The year 2023 got off to a rocky start for many young Korean investors, whose assets are largely stuck in their stock accounts.

Of particular concern is the fact that most of their portfolios focus on once-red hot U.S. stocks, such as Tesla and Apple. Investing in such large-cap growth stocks in the world's largest economy was all the rage earlier on in the pandemic.

But what appeared to be the unstoppable rally of the renowned tech giants has ended up in a sharp decline over the past year. Investors here said they feel increasingly stressed amid the ever-pessimistic outlook on the global economy. They remained poles apart over whether to dump the invested stocks at this period of financial uncertainty.

"I took out non-collateral loans worth around 100 million won ($78,600) back in 2021 and built an investment portfolio with a focus on U.S. stocks ― particularly Tesla," a Tesla shareholder here said. "Few investors would have expected the stock to take such a steep fall back then. I have no choice but to wait for it to rebound, even paying interest on the loans comes as a big financial burden."

After the outbreak of the COVID-19 pandemic in early 2020, Tesla shares soared to a historic high. Its stock value reached as high as $407 in November 2021, but has since failed to extend its winning streak. The firm's stock price dipped to $108 as of Wednesday, a drop of around 70 percent from the previous high. The shocking stock fall, however, is still ongoing, and the extent of the decline is feared to widen for more months to come.

"One biggest lesson I learned from the loss was that we should take extra caution when investing during a bullish cycle," he said. "In 2020 and 2021, most young Korean investors believed U.S. large-cap stocks to be safe assets the value of which would be readjusted with a small margin even in a bearish cycle, which was not true."

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Some others also face tough times after making such ill-timed investments.

"The stock fall, in itself, does not matter unless I sell them off at a loss," a 30-something office worker said. "But the problem is that I have to delay my life plans ― such as marriage and purchasing a home ― due to the untimely stock investment. Most young investors face similar mental stress."

The macroeconomic uncertainties also come as an intensified burden on stock investors here. The economy is facing a possible recession in 2023, and risks of high interest rates will likely remain in place at least until the end of this year.

"Given the bleak economic outlook, any near-term stock rebound appears unlikely, so I try not to pay attention to the asset market, but focus more on my job," he said.

Apple shareholders were also frustrated by the firm's sharp stock fall.

"Apple has long maintained its dominant leadership as the world's most valuable company, so I was in love with Apple stocks and purchased 30 million won worth gradually until early 2022 with a long-term viewpoint," an office worker in his 40s said. "But shares of the seemingly unbeatable company also showed a downward trajectory when the market entered the bearish cycle. Fears of a further price fall are constantly on my mind."

He sold off half of the stocks at a loss amid growing fears of the stock value declining further.

"After watching Tesla's stock collapse, I decided to dump my Apple shares on concerns that the latter may follow in the footsteps of the automaker," he said. "I thought I was different from most other retail investors and would make money with long-term investments, but I failed to overcome the psychological factor in the end."

Apple shares rose to $179 in December 2021, but have since fluctuated throughout 2022. The firm's value tumbled to $125 as of Wednesday, a drop of 30 percent from the previous high. This fall was smaller than that of Tesla, but investors were still frustrated over the double-digit decline of the tech titan.

The soaring interest burden has also pulled down investor sentiment at an alarming pace. Even if the U.S. Fed is nearing the end of its ongoing rate hike cycle, it is expected to take more time before moving to possible rate cuts.

"I purchased a home in 2021 when the housing market bubble reached its peak, and then started purchasing U.S. stocks to make pocket money," a small business owner in Seoul said. "But I did not pay special attention to any potential risks from the interest burden."

"I am having to pay more interest for mortgage and non-collateral loans, and my business does not prosper as it used to as people are reducing spending in what could be the early phase of a recession," he said. "I will place top priority on analyzing risks by forecasting the possible worst-case scenario before making any real estate and stock investments from now on."