The Perspectives of 6 Institutional CIOs: "Caution on Stock Optimism, Real Estate Presents Opportunities"

Survey of Market Outlook by 6 Pension Fund and Mutual Aid Association CIOs
"Stock Market: Majority Warn Against Excessive Optimism"
'PF Crisis' Hits Real Estate Market, "Investment Opportunities Will Arise"

"The financial market, where optimism is spreading due to expectations of interest rate cuts and inflation slowdown, requires a cautious approach, and the real estate market, shaken by the commercial real estate slump and the project financing (PF) crisis, could rather present opportunities."

According to a survey conducted by Asia Economy on the 4th targeting the Chief Investment Officers (CIOs) of six institutions including the Government Employees Pension Service, Korea Investment Corporation, Construction Workers Mutual Aid Association, Korea Local Government Officials Mutual Aid Association, Military Mutual Aid Association, and Yellow Umbrella Fund, they unanimously stated that "in the investment market, crisis is opportunity, and opportunity is crisis." They emphasized the need to pay attention to major political events such as the domestic general election and the U.S. presidential election.

"Beware of Stock Market Optimism"

Heo Jang, CIO of the Korea Local Government Officials Mutual Aid Association, said, "The expectation that the U.S. Federal Reserve will cut interest rates six times within this year has already been priced into the stock market," adding, "If more than six rate cuts do not actually occur, a correction may happen, so we see the stock market as the biggest risk." The Nasdaq index in the U.S. recorded a 43% annual increase last year, the highest rise of the 2020s. The S&P 500 also ended 2023 with an annual increase of over 24%. Heo said, "The current level of U.S. indices is historically the highest, and optimism has caused the market to run ahead too quickly," adding, "This does not mean we view the market negatively, but considering the probability of risks occurring, the stock side carries greater risk."

A CIO from another institution who requested anonymity said, "If inflation indicators come out worse even once, the mood of the stock market can change drastically, so it is necessary to closely watch the indicators to be released in the first half of the year." The U.S. Consumer Price Index (CPI) to be announced on the 11th is a representative example. If the CPI comes out higher than market expectations, it could dampen hopes for inflation slowdown from the beginning of the year. He said, "Instead of vaguely thinking that the market atmosphere will be good because interest rates will be cut, we should consider that if things do not go as expected, it could become a risk."

"Real Estate Could Rather Be an Opportunity This Year"

On the other hand, the real estate market, where pessimism is growing as the PF crisis materializes, was mostly seen as presenting investment opportunities. Lee Sang-min, CIO of the Construction Workers Mutual Aid Association, said, "After the general election in April, many PFs that fail to extend their maturity are expected to come to the market through auctions," adding, "There could be opportunities to buy good properties cheaply." He meant selecting 'high-quality properties' among matured real estate PFs for investment. Another institution’s CIO also said, "Stable guaranteed investments related to real estate, whose prices have been significantly adjusted, will be promising." Heo Jang said, "There is fear about the commercial real estate slump, but it does not seem likely to turn into a financial crisis-level atmosphere suddenly," adding, "Looking at historical experience, there is no such thing as a foretold disaster."

Lee Do-yoon, CIO of Yellow Umbrella Fund, also said, "As real estate PF restructuring progresses, many reasonably priced properties will come out," adding, "We are closely monitoring because investment opportunities may arise."

Opinions on market volatility this year were divided. Lee said, "Since there is a general election in Korea and a presidential election in the U.S., I expect volatility to be high," adding, "Major events are lined up one after another, so investments should be made with attention to those times." On the other hand, another CIO who requested anonymity said, "Since the stock market plunged sharply in 2022 and surged in 2023, I expect less volatility this year," adding, "We are planning investments based on a stable market environment."