Regret sets in as individual investors add up their losses

Economy

Published: 14 Feb. 2022, 19:54 Updated: 14 Feb. 2022, 20:12

Regret sets in as individual investors add up their losses

A screen in Hana Bank's trading room in central Seoul shows the Kospi closing at 2,704.48 points on Monday, down 43.23 points, or 1.57 percent, from the previous trading day. [YONHAP]

After big gains in 2021, the three hottest investment options — stocks, real estate and cryptocurrency — plunged sharply due to the hawkish turn in global monetary policies and rising tension between Ukraine and Russia, leaving individual investors wallowing in despair.

A 37-year-old office worker gets riled up whenever someone brings up investments during a conversation. He poured some 50 million won ($41,667) into large-cap stocks, such as Hyundai Motor and Samsung SDI, but lost 34 percent of the money following the steep slide of stock prices this year.

Adding insult to the injury, property prices are now getting wobbly — a 740-million-won apartment the office worker bought last year in Hwaseong, Gyeonggi, is now valued at 700 million won.

"The overall loss over the past couple of months now equals to my annual salary," rues Choi, "I feel like I jumped into the market when the price hits the highest."

A 40-year-old government official surnamed Lee is also at wits' end. He invested 28 million won, 15 million won borrowed, into bitcoins and other types of cryptocurrencies. The current return rate stands at a negative 40 percent.

"When I thought the price would go up, it went down," he lamented, "and when I thought it would go down, it went down even faster."

Financial markets have rallied for about two years, due to the all-time-low base rate of 0.5 percent and abundant liquidity. The pandemic-driven trend turned as rates started to rise in the face of higher inflation.

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The excess funds are fast vanishing, and the stock market was the first to feel the heat.

The benchmark Kospi closed at 2,704.48 on Feb. 14, down 9.2 percent since the beginning of 2022. It is down 16.9 percent from the peak. The Kosdaq lost 15.1 percent since January.

The cryptocurrency market is no different.

Bitcoin, which hit 81.4 million won on Nov. 8, was 51.2 million won on the Upbit exchange at 3 p.m. in Feb. 14, down 9.7 percent compared to 56.8 million won on Dec. 31.

"The price drop is driven by the concern over dwindling liquidity," said an anonymous crypto industry insider.

Property prices, which soared 9.93 percent in 2021, inched down 0.01 percent on Jan. 24 on a weekly basis. It was the first decline since May 2020, according to data compiled by the Korea Real Estate Board.

The prices kept going down at a similar pace for a third consecutive week since then, and dipped 0.02 percent in the week ending Feb. 7.

An 85-square-meter (914-square-feet) ParkRio apartment at Songpa District, southern Seoul, sold at 2.16 billion won last month, down 200 to 300 million won compared to last October.

The bear market is likely to continue for a while, as the central banks are hinting at additional rate hikes and tapering policies this year.

Analysts forecast that the Kospi might plunge to the 2,500 level.

"Tapering will remain a key issue through this year, so investors are recommended to carefully assess the risk factors," Hana Financial Investment researcher Hwang Seung-taek said.

"The crypto market will remain flat for a while since investors are wary of the current economic condition," said a SK Securities researcher Han Dae-hoon.

As the presidential election is less than a month away, "the property market is expected to show little change during the first half of 2022 but might face some fluctuations in line with the new government's real estate policy," according to Kwon Dae-jung, an economics professor at Myongji University.

A stock market crash is seen as unlikely.

"The market always reacts ahead of possible base rate hikes," said Seoul National University economics professor Ahn Dong-hyun, "so there is no need to worry about a huge market collapse for now."

BY HWANG EUI-YOUNG [shin.hanee@joongang.co.kr]