Still, I Will Live As The Son-In-Law Of A Conglomerate [EN]: Chapter 129

129. 38th. Individual Combat (1)

July 15, 1997, a time when typhoons rage, marked the beginning of more than just a natural phenomenon. A financial typhoon was brewing in Southeast Asia.

I finished my coffee, crumpled the paper cup, tossed it in the trash, and headed down to the office.

Perfect timing. It was 5:30 PM, giving the Hang Seng futures market a 45-minute break. Just enough time to unveil the second phase of our Hong Kong stock market investment plan.

“Let’s grab dinner first, everyone.”

“Yes, Director! Hey, guys, ramen’s on!”

At Min-joo Hyung’s command, the four youngest employees eagerly tore open the packets of ramen I’d brought, sprinkled in the soup base, and poured in hot water. We grabbed our cups of ramen and containers of Korean side dishes and headed into the conference room.

I practically inhaled my ramen, even adding rice to the broth. Then, looking at the others who had emptied their ramen cups just as quickly, I began to speak.

“What do you think will happen to Thailand?”

“What do you mean, Director?”

I calmly answered Min-joo Hyung’s question after he wiped his mouth with a tissue.

“The hedge funds. They’re shorting the baht [Thai currency].”

As soon as July began, hedge funds launched an all-out attack on the Thai baht. Their offensive was relentless, as if they were trying to compensate for their losses during the yen appreciation speculation in Japan, which I had disrupted.

After a moment of silence, Min-joo Hyung cleared his throat and replied.

“They won’t be able to hold out, Director.”

“Why?”

“I’ve only been on Wall Street for a little over a year, but the greed of hedge funds is beyond imagination.”

“That’s right. It was the same during the yen appreciation speculation.”

“Above all, hedge funds have almost unlimited capital. American investors will keep feeding them money. Considering the current scale of the offensive, Thailand will likely go to the IMF [International Monetary Fund] for a bailout by the end of this month at the earliest, or early next month at the latest.”

Just as Min-joo Hyung predicted, the Thai government couldn’t withstand the relentless assault from American and European hedge funds. They abandoned the fixed exchange rate system at the end of the month and requested a bailout of tens of billions of dollars from the IMF.

Having confirmed Min-joo Hyung’s sharp instincts, I posed another question.

“What will happen if Thailand requests a bailout?”

This time, Joo Seung-bin pushed aside his empty ramen bowl and spoke.

“A domino effect will begin.”

“Why?”

“I found out when I was at Standard, but Thailand has been signing support agreements between central banks with various Southeast Asian countries since the year before last, preparing for a foreign exchange crisis.”

“That’s right.”

“The hedges probably targeted Thailand first because of those agreements. Thailand’s exchange rate defense must have used not only its own foreign exchange reserves but also those of other Southeast Asian countries.”

Both Min-joo Hyung and Joo Seung-bin passed with flying colors, demonstrating a strong understanding of the situation. Nodding at the two, I turned to Park Tae-jin.

“Good. Southeast Asia is likely to collapse… After Southeast Asia, where will the hedges target next, Director Park?”

“First, it will be Hong Kong.”

I was pleased with Park Tae-jin’s answer. He identified Hong Kong, where we were operating, as the next target. The fact that he said ‘first’ suggested he had a broader strategy in mind.

Nevertheless, I remained composed, aware of being observed, and continued the questioning.

“Why? If you combine the foreign exchange reserves of the Hong Kong Monetary Authority [HKMA] and the Chinese mainland government, it should be over 200 billion dollars, right?”

“As you said, Director, the Hong Kong Monetary Authority has about 100 billion dollars, and the Chinese mainland government has 125 billion dollars. The hedges will attack the Hong Kong dollar out of habit, so I think we should enter the Hong Kong stock market.”

I hadn’t expected Park Tae-jin to be thinking on such a grand scale. It aligned perfectly with my own knowledge.

Min-joo Hyung interjected in the Q&A between me and Park Tae-jin.

“What are you saying, Director Park? The hedges are speculating on currency, and you want to turn the tables in the Hong Kong stock market?”

“That’s right, Director. As you said, Hong Kong and mainland China both have over 200 billion dollars in foreign exchange, so how could they…”

Following Min-joo Hyung, even Joo Seung-bin couldn’t hide his bewilderment. But Park Tae-jin calmly addressed both of them, and indeed, all twenty of us.

“Hedge funds are underestimating Hong Kong too much. The Hong Kong dollar is linked to the US dollar, right?”

As Park Tae-jin pointed out, Joo Seung-bin nodded.

“That’s right. The peg system maintains a level of 7.75 to 7.85 Hong Kong dollars per 1 US dollar.”

“That’s true. But why are you saying we should turn the tables in the Hong Kong stock market?”

Park Tae-jin continued to answer Min-joo Hyung’s question.

“The Hong Kong foreign exchange market can be defended just by raising interest rates. But what will happen if interest rates rise?”

At Park Tae-jin’s question, not only Joo Seung-bin but also Min-joo Hyung and the others’ expressions changed.

“Then…”

“The funds in the stock market will move to the banks. Of course, the stock price will plummet.”

Min-joo Hyung’s eyes widened at Park Tae-jin’s answer.

“A windfall gain?”

“That’s right. While the hedge guys are bleeding in the Hong Kong foreign exchange market, we invest in Hang Seng Index futures put options [bets that the index will fall] and make a profit. What do you think, Director?”

Did I need to say more? It was like hitting a grand slam in the bottom of the ninth with two outs!

If my memory serves me correctly, the Hong Kong Monetary Authority will raise interest rates aggressively, vowing to punish the speculators. By the end of October, they will even resort to a drastic measure: a ‘short-term interest rate of 300 percent.’ This will inevitably cause the Hang Seng Index, then approaching 16,000 points, to plummet.

Meanwhile,

The speculators on Wall Street are experts at exploiting any opportunity to make money.

It’s obvious that they’ll allocate a significant portion of their funds to betting on a Hang Seng Index crash, anticipating potential losses from currency speculation. Isn’t maximizing profit in any situation the hedge fund’s golden rule?

“I think so too. What do you all think?”

I lightly tapped the desk and asked, looking around at everyone. They all nodded in agreement. I addressed them.

“So far, we haven’t touched the Southeast Asian foreign exchange market. This is for the future of Hae-dong Group.”

When hedge funds began attacking Thailand, everyone except me and Park Tae-jin wanted to jump in and profit. However, Southeast Asia held potential for Hae-dong Group’s future business ventures, so Park Tae-jin and I, mindful of the bigger picture, rejected their proposals.

“So far, the total amount of money we’ve made through futures trading is 600 million US dollars. Right?”

“That’s right, Director.”

So far, we had turned 300 million dollars into 600 million dollars in the Hang Seng futures market. I was genuinely grateful to the twenty people who had supported my vision leading up to this moment.

“All that money! Let’s bet it all on Hang Seng Index put options.”

“Whoa!”

Min-joo Hyung raised his clenched fist and shouted, and the other 19 people cheered as if they were about to explode with excitement. How thrilled they must be to finally put their Wall Street skills to the test!

“The products to invest in are put options with a 20x multiplier for August to November maturities. Let’s recover all the Hang Seng futures investment tonight and start buying put options right away tomorrow.”

***

After recovering all our investments that evening, we decided to invest half of our funds in Hang Seng Index put options as the first tranche [a portion of funds allocated to a particular investment]. Only then did we leave the office and return to our lodgings.

I finished showering and checked the time; it was already approaching 1 AM. As I sat on the bed, drying my hair with a towel, Park Tae-jin handed me a can of beer.

“You’ve worked hard, Young Master. Have a drink.”

“Thanks.”

We popped open the cans, lightly clinked them together, and took a swig of beer.

“Haaah! That hits the spot. I felt sorry for everyone all this time.”

“I also think you did well, Director. Finance isn’t everything to Hae-dong, it’s just a part, isn’t it?”

“That’s right. Even though it’s in that state now, Southeast Asia will definitely become a big market.”

It’s been 27 years since the Bretton Woods system [the global monetary system established in 1944] collapsed and the gold standard was abandoned.

Since then, the global economy has measured wealth by who earns more dollars. The source of wealth has become who can create better products and sell them at higher prices.

In that reality, Hae-dong Group cannot catch up with Shinseong Group. All the work so far has been just minimal preparation.

Of course.

Not engaging in currency speculation in Southeast Asia is one of those things.

Because Shinseong Group can’t be taken down with just money games.

Because Shinseong Group needs manufacturing to be taken down.

We didn’t touch Southeast Asia to avoid being excluded from the market our group needs to enter.

Hong Kong is different. Making money in a crash is close to luck. To me, it’s just like dealing cards in order in a ‘Go-Stop’ game [a popular Korean card game] where the ‘tan’ [a scoring combination] is set up to get the desired hand, score points, and win money.

I snapped out of my momentary digression, took a swig of canned beer, and said to Park Tae-jin.

“You’ve changed a lot since I last saw you.”

“In what way do you mean?”

“That speculators will target the Hong Kong stock market.”

Park Tae-jin smiled sheepishly and said.

“Director, you always seem to see this world as a giant chessboard. So I tried to imitate you, haha.”

“Imitate? You put in that much effort, so you came up with that opinion. I agreed with that opinion too.”

Park Tae-jin looked different after not seeing him for a few months. I regretted not living apart like this sooner, but his growth was satisfying enough, considering the long days ahead.

“Thanks to you, I got a good opportunity. Thank you.”

“No thanks needed, Young Master. If it weren’t for you, I wouldn’t have had the chance to think like this, haha.”

“Then, shall we cheers one more time?”

“Let’s do that, haha.”

I clinked the can ends with Park Tae-jin once more and drank the beer. Even though I was mentally and physically tired, the refreshing taste of the beer spread vividly in my mouth today, perhaps because of the pleasant mood.

“Haaah, if this goes well, I won’t have anything else to wish for. It has to go well, even because of Ha-yeon.”

I feigned exaggeration, but Park Tae-jin sat next to me and patted me on the shoulder.

“It will go well, Young Master. Just in case, you left half for the second tranche, didn’t you?”

“I did… but I hope it goes well anyway. That way, both you and I will stop getting nagged by Grandpa, hehe.”

Park Tae-jin smiled as he looked at me grinning.

“It definitely has to go well. So that you only get nagged by the Chairman until this year, right? Haha.”

“That’s right. It will go well. I want it to go well, and it has to go well.”

Even though I was lying, I felt good. Once this is over, I’ll get Ado Motors and our marriage issues will be resolved.

***

The next morning.

I went to work and was talking to Claire on the phone in my office.

“…Yes, Claire. How’s Wall Street?”

[There’s talk that if they settle things in Thailand this month, they’ll scatter to Singapore, Indonesia, or Malaysia. Hong Kong is the top priority, of course.]

As expected, Hong Kong was the biggest target for hedge funds. I had to finish all the preparations by the time those guys came so I could make money.

“Thanks, Claire. I’ll make a lot of money this time.”

I came out of the office and told the people at Hae-dong Securities about the news from the US, then started buying put options with the money I had taken out of the futures market. It goes without saying that I diversified my investments from August to September, October, and even November maturities that were expiring next month.

As time passed, it became August 10th.

We finished investing the first tranche of 300 million dollars in the morning, and as usual, we were watching the foreign exchange spot market, the forward exchange market, and the call rate trends on the computer and TV.

“How’s the spot exchange trading, Chief Joo? The buying of Hong Kong dollars is constantly increasing in the forward exchange market.”

Joo Seung-bin took his eyes off the monitor and answered Min-joo Hyung’s question.

“Selling continues in the spot exchange market, Director. I don’t know how much money those hedge guys are pouring in.”

The hedge funds that had invaded the Hong Kong foreign exchange market were short-selling Hong Kong dollar spots indiscriminately to exchange them for US dollars, while buying up all the Hong Kong dollars in the forward exchange market.

“They’re going to pay off the spot exchange with forward exchange when the exchange rate falls… It’s no different from the yen appreciation speculation. Trite guys.”

I had been trading outside, moving the computer out of my room, without using a separate room since the day I decided to buy put options. I shook my head as I listened to the two men’s conversation. Park Tae-jin chuckled at my appearance.

“It’s a good thing since we’re the only ones sitting on a pile of money thanks to those guys, hehe.”

Perhaps because he had been trained by the Mexican currency speculation and the yen appreciation speculation, Park Tae-jin now had the scent of a ‘hustler.’ As we smiled at each other for a moment, breaking news appeared on the large TV hanging on the wall.

[The Hong Kong Monetary Authority will inject 4 billion Hong Kong dollars to defend the stock market, which is being shaken by speculators. This is only the beginning, not a one-time measure…]

As I watched the news, my whole body tingled as if a spark had occurred.

“That’s it!”

Among the people who were staring blankly at me as I jumped up from my seat and shouted, Min-joo Hyung was the first to follow me and shout.

“…Waaah!”

“Waaah!”

The people at Hae-dong Securities all got up from their seats and jumped around or threw documents into the air, cheering. How happy they must be since we did this ourselves, even though we had Claire’s source?

Thump!

“Bet all the remaining money! It starts now!”

Everyone answered loudly to my order to slam the table hard with my palm.

“Yes, Director!”

It was the moment when the second stage, the core of the Hong Kong project, began. Only the second stage remained to be completed before we could return home in triumph with these people.