Golden Spoon Investment Portfolio - Chapter 322

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This chapter was translated by Lunox Novels. To support us and help keep this series going, visit our website: LunoxScans.com
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322. The other two options won’t trigger as well, will they?

Inside the spacious penthouse, soft piano music drifted through the air.

[SET : 587 (
32)]

Seok-won sat alone on the sofa, a glass of whiskey on the rocks cradled in one hand, murmuring to himself as he studied the Thai SET index chart displayed on his laptop screen.

“It’s certainly good that we repelled the currency speculators’ assault, but that doesn’t mean it’s beneficial for Thailand’s economy and stock market.”

If anything, it was closer to a major catastrophe.
The moment the baht strengthened, it weakened the export competitiveness of already struggling companies, and the sudden spike in the benchmark interest rate to 19.5% only added to the burden of loan interest payments.

“Moreover, the hedge funds’ assault on the baht hasn’t completely ended, and this crisis has exposed Thailand’s economic vulnerabilities for all to see.”

Not only that, but the foreign exchange reserves had been significantly depleted in the effort to defend the exchange rate, creating an unstable situation where no one knew when the time bomb would detonate again. Investors had only one course of action.

“That’s to sell risky assets like stocks and move their money to safety. And when we talk about safe assets, that means gold and dollars.”

Under normal circumstances, with interest rates rising so sharply, money would have flowed into banks, but no matter how much interest they offered, it was obvious as day that the baht’s value would plummet—making savings deposits a fool’s errand.

“Well, unless they offered interest rates higher than the 50% drop in the baht’s value, but that’s not happening.”

In the end, the measures taken to defend the baht had boomeranged, triggering a stock market crash and exploding demand for dollar conversion, which only further depleted Thailand’s already insufficient foreign exchange reserves.

“And when the issue of Thai companies’ 87 billion dollars in foreign currency debt surfaces, the anxiety will only intensify further.”

Since everything was pointing to a devaluation of the baht, George Hamilton and the other hedge funds absolutely would not back down.

“And next time, no matter how much support Hong Kong and other Southeast Asian central banks provide, Thailand won’t be able to hold out.”

After reducing Thailand to ruins and reaping massive profits, the currency speculators would not be satisfied—they would systematically topple the other Southeast Asian nations one by one before finally baring their greedy fangs at Korea.
With cold, steely eyes, Seok-won took a sip of whiskey, the ice clinking softly against the glass, then set it down and picked up his mobile phone from beside the laptop.
He found the saved number, pressed the call button, and leaned back against the sofa armrest as the dial tone sounded.
After a brief moment, John Porter, the branch manager of Eldorado Fund’s Japan office, answered the call.

[Boss. I was just about to contact you.]

Seok-won glanced at the laptop screen as he spoke.

“You’ve checked the Thai SET index, haven’t you?”
[Of course.]

Porter continued, his voice tinged with amusement.

[I never imagined the SET index, which was struggling to break past 1,300 points when we signed the options contract, would collapse so dramatically in an instant.]
“How are the Japanese securities firms reacting?”
[I haven’t heard from them yet, but they’re undoubtedly panicking. They thought they’d simply pocket the commissions from what seemed like a straightforward contract, and now they’re facing losses of a billion dollars.]

Seok-won, holding the phone to his ear, allowed himself a faint smile at Porter’s evident elation.

“For now it’s a billion dollars, but it’ll grow to three billion soon.”

As Seok-won corrected Porter’s assessment, an audible gasp of surprise came through the phone.

[Are you saying the Indonesian and Korean stock markets will also plummet?]
“Why else would we have paid such steep premiums for the options contracts?”

The question of whether it was possible rose to Porter’s throat, but he couldn’t bring himself to voice it. After all, Seok-won’s prediction about the Thai market had proven accurate, even when Porter had doubted the SET index could break below 600 points.
The Thai stock market had indeed collapsed beyond what Porter had thought possible.
After a moment of silence, Porter spoke again.

[If things unfold as you say, the Japanese securities firms that signed these contracts will be utterly devastated.]
“Precisely. Since the options conditions have been met, let’s proceed with demanding the billion-dollar payments according to the contract terms.”

Seok-won issued the instruction with the casual tone of someone discussing an evening menu.

[Understood.]
“The contract specifies that payment must be made within a week of the demand.”
[That’s correct.]

Seok-won adjusted his grip on the phone and continued.

“Once the profits arrive, keep them in the Japan branch account, then follow headquarters’ instructions to establish a short position on the baht in the Tokyo foreign exchange market.”
[Are you shifting your position this time?]

Seok-won was satisfied to see that Porter showed no surprise at his expectation that the hedge funds would launch another attack on the baht.

“They’ve exhausted their ammunition this time, and given Thailand’s economic situation, there’s no way they can maintain the current exchange rate.”

Porter, the branch manager, nodded in agreement with Seok-won’s confident assessment.

[You’re absolutely right. Without the support of Hong Kong, Singapore, and Malaysia this time, Thailand wouldn’t have been able to withstand the attack.]
“That’s true.”
[According to rumors, hedge funds including the Quantum Fund are liquidating large amounts of U.S. Treasury bonds to raise capital for a second attack.]

Whether that was true or not, U.S. Treasury prices had indeed been showing weakness recently.

[If there’s a high probability that the Thai government will surrender, wouldn’t it be wise to borrow low-interest yen funds and increase your investment capital?]
“You’re suggesting a yen carry trade.”
[Precisely.]

A yen carry trade referred to borrowing funds from Japan, where interest rates were low, and investing in countries with higher interest rates to generate profits.
Due to prolonged economic stagnation, Japan’s interest rates were lower than other developed nations, and the yen was cheap relative to the dollar, so many global investors were actively utilizing yen carry trades.

‘Andrew had mentioned that many of the hedge funds attacking the baht were also drawing on low-interest yen funds.’

Seok-won spoke, recalling the information he’d heard from Andrew.

“Borrowing yen to invest won’t generate significant profits this time.”
[What do you mean by that?]

As Porter, the branch manager, showed confusion, Seok-won picked up his glass of Underberg and brought it to his lips before answering.

“A yen carry trade fundamentally requires low interest rates and a cheap yen to be profitable.”

The quick-witted Porter immediately grasped what he meant.

[You’re saying that even if the yen appreciates and generates profits, it will eat away a significant portion of the gains.]
“Exactly. If my prediction is correct, as Thailand weakens, demand for safe-haven assets will increase, and the yen exchange rate will rise more than 10% from current levels. So right now, a yen carry trade simply isn’t attractive.”

The yen, along with the dollar and pound, was one of the representative reserve currencies, and the pattern it had consistently shown was that its value surged significantly when crises occurred.
Porter, who hadn’t thought that far ahead, let out a low exclamation.

[You’re right. I should have anticipated the yen fluctuations as well. I apologize for the oversight.]
“In a world where the global economy is becoming increasingly interconnected, remember that when problems arise in one place, their ripple effects spread far wider and faster than they used to.”
[Yes. I will keep that in mind.]

I sipped my whiskey and gently swirled the rocks glass in my hand before asking.

“By the way, since you mentioned the yen appreciation, I’m curious—excluding the CDS option profits, how much liquid capital does the Japan office have available?”
[After accounting for various investments, we have approximately 8.255 billion yen.]
“That converts to roughly 650 million dollars.”
[That’s correct.]

I nodded slightly and spoke calmly while sinking deeper into the sofa.

“Then use that as margin to short as many Nikkei futures as possible.”

Porter, startled by the unexpected instruction, asked in surprise.

[You believe the Nikkei will crash as well?]

At that, I smiled darkly.

“Japan may deny being part of Asia, but when Southeast Asian countries falter, Japan will inevitably suffer the consequences.”
[Ah, I see. Japan has invested the most heavily in Southeast Asian countries, including Thailand, so that makes perfect sense.]
“Moreover, Japanese companies are currently thriving thanks to the weak yen. But if the yen suddenly strengthens, exports will become difficult—that’s bad news for the stock market.”
[You’re right. The downside risks are clearly greater than the upside potential.]

As Porter realized this was an opportunity to profit, his tone became more enthusiastic.

[How much leverage should we use?]
“Since we’re certain to make money on this, use maximum leverage and go all-in.”
[I’ll proceed as instructed.]

Porter answered with eager determination in his voice.
After ending the call and setting the phone down, I finished the remaining whiskey in my glass cleanly and muttered to myself.

“It’s really unfortunate that I wasn’t able to see for myself how Japanese securities firms would react to the payment request sent in.”

***

Nomura Securities Headquarters, Nihonbashi, Chuo-ku, Tokyo, Japan.
Chuo Ward Nihonbashi, Tokyo, Japan. Nomura Securities Headquarters.
The President’s Office on the top floor was shrouded in heavy silence, the atmosphere oppressively thick.
It was hardly surprising—the sudden collapse of Thailand’s SET Index had inflicted a staggering loss of one billion dollars.

“So, does this mean that there was a loss of $1 billion due to the CDS option contract signed with Eldorado Fund?”

Then Managing Director Usami, who was sitting next to General Manager Nakamura, answered while continuously breaking into a cold sweat.

“Yes. That’s right.”

As soon as he could answer, he slammed his palm down on the armrest of the sofa where President Yamakawa was sitting and let out a loud yell.

“The contract should have been terminated by paying a penalty before anything happened. How on earth do you manage risk?”

Director Usami was so angry that he shrugged his shoulders and lowered his head without making proper eye contact at the shout that echoed throughout the room.

“I am dishonorable because my mistake in judgment caused great damage to the company.”
“I have no excuse for the grave loss my poor judgment has caused the company.”

President Yamakawa said in a cold voice.
Yamakawa Hiroshi spoke in a glacial tone.
Pierced by that icy stare, Usami trembled slightly. The humiliation was so acute he would have gladly crawled into a hole if one existed.
Nakamura Shoichi, the department head, was equally uncomfortable, as though sitting on thorns.

“I said there were two more contracts with the El Dorado guys besides this.”

Then Managing Director Usami looked at me and answered.

“Options are at stake on Korea’s KOSPI and Indonesian stock markets.”

President Yamashita looked at the two with a disapproving expression and spat out words.

“Cancel both right now!”
“Terminate both of them immediately!”

Director Nakamura, with a perplexed expression on his face, hesitated and answered.

“What? You’re saying you can’t follow my instructions now!”

As President Yamashita raised his eyebrows, Director Nakamura hurriedly waved his hand.

“Well, that’s not it. There’s a penalty, so it’s not easy to cancel.”
“No, that’s not it. There’s a penalty clause attached, so it’s not easy to terminate the contract.”
“How much is this penalty, exactly?”

Director Nakamura was in a cold sweat and could not answer right away.
Nakamura couldn’t answer immediately, cold sweat beading on his forehead.

“…80% of the option contract amount is required to be paid as a penalty.”
“…The penalty is set at 80% of the option contract amount.”
“80%? That means we have to pay 1.6 billion dollars!”

Yamashita Jasang burst out laughing as if it was absurd, then glared fiercely at the two people and shouted.

“You must be sane to sign a contract like that!”

Since a contract of this size could not be concluded on his own, it was a matter that naturally received the approval of President Yamashita.
A contract of this magnitude couldn’t have been concluded by Usami’s unilateral decision—it naturally required Yamakawa Hiroshi’s approval.
But if he said that now, disaster would surely strike.
Besides, regardless of the circumstances, the option contract with Eldorado Fund had been executed through Usami’s decision, so he could only endure the rebuke in silence.

“Surely the other two options won’t be activated as well?”

When asked in a sharp voice, Managing Director Usami answered urgently.

“Thailand was an anomaly, so that won’t happen.”
“Thailand was an exceptional case. Something like that shouldn’t happen again.”

President Yamashita responded coldly.
Yamakawa Hiroshi replied coldly.
Nakamura, who had been keeping his head down, couldn’t shake an ominous feeling.

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This chapter was translated by Lunox Novels. To support us and help keep this series going, visit our website: LunoxScans.com
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