MZ (Mijeori, Zombie) Generation Cries

Hana Securities Presents Investment Strategies for the MZ Generation

[Asia Economy Reporter Junho Hwang] 'MZ Generation'

Originally, it was a term collectively referring to the Millennials born from the early 1980s to the early 2000s and Generation Z born from the mid-1990s to the early 2000s.

However, in the stock market, it refers to the generation that experienced a liquidity surge from 2020 to 2021 and is suffering from global tightening. They can be described as the generation that invested at the end of a bull market and whose held assets are in a loss phase (M, Misery), or the generation that spends most of their income on funding costs due to high interest rates or cannot bear them (Z, Zombie).

Zombie Generation in Pain

Hana Securities presented the current status of MZ Generation investors and future investment strategies on the 10th through a stock market issue report.

The new MZ Generation enjoyed an unprecedented investment boom, supported by low interest rates and abundant liquidity, with the KOSPI surpassing 3000 and soaring cryptocurrencies.

However, concerns about 'tapering' emerged, and subsequently, the U.S. Federal Reserve's tightening measures proceeded more rapidly and sharply than ever. Accordingly, the KOSPI dropped to levels below those just before the COVID-19 pandemic, causing increased pain for the MZ Generation as stock prices fell.

Next Year: The Era of High Interest Rates

In this context, next year is likely to be an era of high interest rates. Looking at the rates reflected in U.S. interest rate futures, the Fed is expected to raise the terminal rate to around 5% by June next year. Conditions for the Fed to lower rates include below-trend growth, labor market supply-demand balance, and inflation falling to around 2%, but such conditions are unlikely to occur soon.

Under these circumstances, MZ Generation investors who used leverage are likely to suffer even more. Leverage fundamentally involves borrowing and investing by paying funding costs, so the burden increases during high interest rate periods. If the market crashes, forced liquidation could trigger a chain of panic selling.

Researcher Jaehyuk Han of Hana Securities diagnosed, "The MZ Generation's nemesis is interest rates," adding, "Liquidity released into the market will lead to a high interest rate period following the rising interest rate phase," and "this will be the biggest cause of pain for the MZ Generation."

Next Year Will Be Difficult Too

At least the quick-moving MZ Generation escaped the stock market swiftly. Following the rise in interest rates, they moved to deposits and savings accounts, which gained attractiveness as investment assets, or to the bond market where fixed returns can be received within a promised period.

However, most remain in the stock market, holding their breath. They hope for market improvement next year, but it is uncertain whether the market will move in the desired direction.

Researcher Han explained, "If you must invest in risky assets like stocks, the company's cash-generating ability and cash holdings will be important investment decision factors," adding, "If risky assets are burdensome, strategies such as buying deposits, savings, or short-term corporate bonds of high-quality companies and holding them until maturity are also valid."

Also, since leading stocks always emerge, investment in promising stocks next year can be considered. Researcher Han pointed out defense, nuclear power, smart factories, and NEOM City as themes to watch next year. Defense and nuclear power are expected to benefit from increased global demand and government drives, smart factories from large-scale investments by major corporations, and NEOM City as a major global bidding event, all of which are expected to relatively shine.

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