Golden Spoon Investment Portfolio - Chapter 352

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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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352. The festival only lasts until today, so I hope everyone enjoys it to the fullest.

June 24, 1997.
Summer had arrived early, and for days now, the scorching heat had pushed temperatures above thirty degrees Celsius, showing no mercy.
As night fell, the temperature dropped somewhat, but the accumulated heat radiating from the asphalt roads and concrete building walls of the city kept many people from sleeping properly through the night.
Seok-won, too, remained awake despite the late hour past midnight—though not because of the tropical night, but for other reasons entirely.
As Seok-won poured the newly released Johnnie Walker Pure Malt 15-year-old into an old-fashioned glass filled with ice, I held my phone to my ear, speaking with Landon Shore in New York.

[As you predicted, Taiwan’s central bank preemptively loosened the currency band, and the Taiwan dollar is plummeting to 30 TWD per dollar.]
“With the foreign exchange crisis spreading northward from Southeast Asia, currency depreciation is inevitable anyway. It’s far better to devalue it first rather than take a beating.”
[Even so, there’s still plenty of opportunity—do you really think Taiwan won’t become a target for hedge funds?]

Setting down the whiskey bottle, Seok-won moved toward the living room with glass in hand and answered.

“Taiwan holds 83 billion dollars in foreign reserves—the third largest after Japan and Hong Kong. Moreover, after suffering a real estate crisis years ago, they’ve imposed strict lending regulations, so unlike Southeast Asian countries, they don’t have a property bubble.”

Standing before the expansive floor-to-ceiling windows, Seok-won gazed out at the glittering nightscape and continued calmly.

“In other words, they’ve built their walls high and strong. And with an economy smaller than Japan’s or Korea’s, the cost of attacking Taiwan while they’re defending so solidly would outweigh any gains.”
[Now that you mention it, that makes sense. If you expend all that effort to collapse the Taiwan dollar but gain little in return, it’s better not to bother.]
“Exactly. Plus, with Hong Kong as a formidable opponent right in front of them, they won’t have the resources to focus elsewhere—which works in Taiwan’s favor.”

Because Taiwan had built up its foreign reserves like a sturdy breakwater against rough waves, it could remain sheltered from the fierce storm of the foreign exchange crisis sweeping through Southeast Asia and moving northward.
Korea, by contrast, possessed meager foreign currency reserves and was burdened with mounting current account deficits and massive short-term foreign debt—an easy and appetizing prey for currency speculators.

“Has the Quantum Fund shown any unusual activity?”

Seok-won asked, bringing the old-fashioned glass to his lips and sipping the whiskey.

[No. After liquidating most of their positions, they’ve remained quiet.]
“The foreign exchange crisis continues unabated across Southeast Asia, yet they’re making no moves—that’s a sign they’re preparing something big.”
[I agree.]
“Hong Kong reverts to China in a week, so they’ll make their move soon, one way or another.”
[Then there’s a strong possibility they’ll begin by heavily shorting the Hong Kong dollar in the futures market, putting pressure on Hong Kong.]

Seok-won nodded lightly in agreement.

“That’s probably what will happen. When the attack begins, not only the Hong Kong dollar but the Hang Seng Index will plummet as well.”
[If interest rates are raised to defend the exchange rate, stock prices will inevitably fall.]

If investors could earn high interest on bank deposits with guaranteed principal, there was no reason to take the risk of stock investments. Capital naturally flowed out of the stock market.

“The Hong Kong Hang Seng Index closed at 16,148 today.”
[Yes, that’s correct.]

Seok-won spoke while rolling an ice-filled rocks glass in his palm.

“Before George Hamilton makes his move, let’s sell Hang Seng Index futures and establish a short position.”
[How much should we bet?]
“This is a game we’re certain to win, so let’s sell as many futures as we can possibly bet.”
[Understood.]

Landon Shore shared the same conviction, so he answered without any particular objection.
If his memory served him correctly, the Hong Kong Hang Seng Index had lost half its value from its peak.
Hedge funds like George Hamilton had expected that the Hong Kong government would be unable to tolerate the stock market collapse and would ultimately surrender, devaluing the Hong Kong dollar.
But contrary to those expectations, Hong Kong authorities defended the exchange rate to the end, even at the cost of allowing the stock market to deteriorate.

‘The ones who got struck by lightning in that gap were individual investors who had invested in Hong Kong stocks.’

Of course, global institutional investors who had poured money into Hong Kong also suffered massive losses, and the aftershocks eventually crossed the Pacific to reach the New York Stock Exchange.

“What about the short position we established on the Dow Jones Index futures?”
[The volume was so large that I expected it would take considerable time to unload everything, but contrary to my concerns, there are many buyers. It looks like we’ll be able to complete the position building within this week.]

Seok-won’s expression showed slight surprise at the news that they had sold an enormous volume of 4.44 billion dollars in futures—combining the 4.12 billion dollars in profits earned from betting on the ringgit and Daheung Group’s spare capital of 320 million dollars—and had managed to absorb nearly all of it.

“Didn’t you say you also used leverage?”
[Since the base betting amount was so large, we only used 3x leverage without taking on too much risk.]

In an era when 10x leverage was considered standard practice, 3x was an extremely conservative approach.

[With the dot-com boom driving both NASDAQ and the Dow to new heights, everyone seems to believe the indices will continue climbing.]

Seok-won then responded as if he now understood.

“If we buy futures, we can profit as much as the Dow Jones Index rises, so there’s heavy buying pressure.”
[That’s correct. In the current atmosphere, we could easily absorb even larger volumes.]
“It’s fortunate that there are so many buyers willing to take our positions.”

Seok-won smiled faintly at the corner of his mouth.
For a moment, he wondered if the New York Stock Exchange was collapsing even more dramatically than it would have been, precisely because he had shorted the Dow Jones Index futures.

‘No matter how much the American stock market dominates the global securities market—accounting for well over 60 percent—a massive explosion of 13.32 billion dollars in the futures market would be enough to trigger a shock.’

The dot-com bubble was still burning hot, so the stock market wouldn’t collapse entirely, but it could deliver a shock comparable to Black Monday a decade ago.
Soon, Seok-won’s eyes gleamed with interest as he spoke.

“If things develop this way, we could generate far greater profits than we initially anticipated.”
[If the Dow Jones Index plummets as you predicted, the funds and investment banks that bought futures will have no choice but to hastily liquidate their stock holdings to cover their losses. This will naturally amplify the decline, which works entirely in our favor.]

Landon Shore added with a mischievous laugh.

[Perhaps because of you, many traders on Wall Street might be clearing out their desks before year’s end once again.]
“The more traders who get fired, the thicker your bonus envelope becomes, doesn’t it?”
[Haha. That’s exactly how it works out.]

At the playful tone, Seok-won let out a soft chuckle.

“In any case, the Quantum Fund will make its move soon, so contact me immediately if you see any signs.”
[Understood.]

After ending the call, Seok-won gazed at the night cityscape while taking a sip of cold whiskey.

* * *

Quantum Fund Headquarters, 7th Avenue Manhattan.
In the spacious Executive Office, George Hamilton sat in the center of a leather sofa with Rodney, the CIO, and Ian, the Chief Manager, seated on either side, all watching a large television mounted across from them.
The screen broadcast live coverage of the Hong Kong Sovereignty Handover Ceremony taking place in the Grand Foyer of the Hong Kong Convention Centre.
Large flags of Britain and China hung on the walls of the grand hall, and over four thousand distinguished guests from both nations attended to witness this historic handover ceremony.

[This momentous and extraordinary event marks a turning point and continuity in Hong Kong’s history. First, today’s handover ceremony, conducted in accordance with the Sino-British Joint Declaration agreed upon in 1984, represents Britain’s return of Hong Kong—which it has governed for over 150 years—to China. Both governments have agreed that to sustain this success, Hong Kong will maintain its separate trading and financial systems, guarantee an elected legislature with autonomy, and preserve its current laws and freedoms. We will watch with keen interest as Hong Kong opens a new chapter in its history.]

As the British Crown Prince’s formal address concluded and the second hand swept to 11:59, the British military band solemnly performed the national anthem, “God Save the Queen.”
During the ceremony, the Union Jack and Hong Kong flag hanging from the podium’s flagpoles descended slowly downward.
Rain had been falling steadily since before the event began, drenching the assembled dignitaries and flags—as if foreshadowing the grim future that awaited Hong Kong.
As midnight passed and July 1st arrived by Hong Kong time, the Chinese national anthem rang out powerfully while the red five-star flag and the Hong Kong Special Administrative Region flag were newly hoisted, erupting in applause as the venue filled with cheers.
Soon after, the Chinese President took the stage to deliver a congratulatory address, declaring to the world that Hong Kong had returned to China’s embrace.
As the ceremony concluded, the royal yacht Britannia departed Victoria Harbour carrying the British Crown Prince and his delegation, while fireworks celebrating the handover erupted brilliantly against the backdrop of towering skyscrapers.
George Hamilton, who had watched the lengthy handover ceremony with keen interest, opened his mouth with a cigarette held between his fingers.

“Truly a historic moment.”

Ian, the chief manager, spoke as if in agreement.

“With Hong Kong, once called the Pearl of the Orient, now lost, the glorious British Empire has truly faded into the pages of history.”
“That’s how I see it.”

George Hamilton gazed at the television, watching the magnificent fireworks display fade into darkness as the British royal yacht receded into the night, his expression contemplative.
He then stubbed out his half-smoked cigarette in an ashtray and turned his gaze toward Rodney, seated to his left.

“I apologize for dampening the celebration, but now, with the handover just completed and everything in chaos, this is their most vulnerable moment. We cannot afford to miss such an excellent opportunity. Begin the attack as planned.”
“Then we’ll begin selling Hong Kong dollars starting in the Tokyo futures market.”
“Do it.”

George Hamilton stared intently at the television, where the magnificent fireworks continued to unfold, and murmured to himself.

“Let them enjoy the festival while it lasts today.”

He then sank deep into the sofa, a dark smile spreading across his lips like a predator gazing upon its helpless prey.

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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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