Golden Spoon Investment Portfolio - Chapter 401

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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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401. A true recovery is when you hit rock bottom again and bounce back up.

November 3rd, 1997. Daeheung Securities on Yeouido.
About forty individual investors gathered in small groups throughout the trading floor, their eyes fixed on the massive ticker board mounted on one wall.
With nearly every stock surging strongly for the second consecutive day, their faces were bright with optimism.

“Look there. Sasung Electronics is surging!”
“Hyunwoo Automobiles is up too. ST Securities is going to hit the ceiling at this rate, isn’t it?”
“Wow. Look at the trading volume pouring in.”

Unlike the previous trading day when the rebound had succeeded but remained somewhat cautious, today buying pressure flooded in from the opening, pushing the stock index sharply upward.
Not only the IMF, but the IBRD and the Asian Development Bank announced they would each provide 10 billion and 4 billion dollars respectively, while thirteen countries including the United States, Japan, Germany, France, and Australia pledged a massive 23.3 billion dollars in support.
The market was seized by optimism—perhaps the worst of the crisis had finally passed.
In this atmosphere, as one of the follow-up measures to the IMF agreement, the foreign investor stock investment limit was significantly raised from 26% to 50%, further amplifying expectations for stock price increases.

“This won’t do. I need to buy more shares before they go up again.”
“Yeah, yeah. Come on, let’s go!”

The man in the jumper, watching the ticker board turn completely red as most stocks soared, felt his heart race. He hurried toward the trading window, and his companion rushed after him, adding to his stock purchases.
Others too crowded toward the window to buy stocks, and the area before the counter began bustling once more.
It resembled the scene from days before, yet the atmosphere was distinctly different.

* * *

As I passed through the door that Na Seong-mi held open and entered, Seok-won, seated at his desk, lifted his head to look at Manager Choi Ho-geun.

“Ah. Welcome.”

Manager Choi Ho-geun approached and bowed slightly before speaking.

“You called for me.”
“Yes. Don’t stand there—come sit on the sofa so we can talk.”

Rising from his seat, I walked around the desk and sat in the center position of honor. Watching Manager Choi Ho-geun take a seat on the left sofa, I spoke.
Seok-won spoke as he watched Manager Choi Ho-geun take a seat on the sofa to the left.

“The market sentiment has been quite favorable today as well.”
“Yes. With the IMF negotiations concluded and foreign stock investment limits set to expand significantly, the investment psychology that had been frozen solid is now fully awakening.”

Seok-won nodded slightly.

“Given the substantial amount of capital that has fled the stock market, there’s likely considerable anticipation that stock prices will surge once foreign investors return.”
“In fact, almost every time foreign investment has increased so far, the market has skyrocketed, so there’s certainly a learning effect built from experience.”
“That’s certainly true.”

Seok-won leaned back against the sofa and continued speaking.

“The beast’s heart that has been dormant in the chests of individual investors is awakening again, driven by the expectation that buying now could yield substantial gains.”

Indeed, as the stock market revived, buy orders poured in indiscriminately—not only securities stocks that benefited immediately, but also construction and trading companies that had been devastated by the direct impact of the foreign exchange crisis.
As a result, stocks that had been knocked down by the price collapse and listed as margin liquidation volumes were being absorbed through considerable trading activity.

“We’ve confirmed that foreign investors, who had been consistently selling off stocks, have stopped their selling pressure and switched to net buying of approximately 20 billion won in the last trading session.”
“A shift to net buying is a clear signal that foreign investors are returning. It’s certainly cause for individual investors to celebrate.”

Even amid the euphoric atmosphere, Seok-won maintained a composed demeanor.

“The index is rising much faster than expected. Wouldn’t it be wise to gradually resume buying?”
“No. Do the opposite—sell.”
“Pardon?”

Manager Choi Ho-geun, who had asked cautiously, blinked in startled surprise.
With the stock market having completely bottomed out and now surging, it made sense to be bewildered by an instruction to sell holdings rather than add to positions.

“I called you here to discuss selling off our stock positions.”

At the composed tone, Manager Choi Ho-geun couldn’t respond immediately and swallowed hard.
He couldn’t immediately grasp what reasoning lay behind such an instruction.
Seok-won, observing the bewildered Manager Choi Ho-geun, calmly explained his reasoning.

“Do you remember when I said this rally wasn’t a genuine rebound but a fake-out?”
“Yes, I do.”
“I’m sure you’ve heard that when you add up all the bailout support announced by the government, it exceeds 58.3 billion dollars.”
“I read in the newspaper that it’s the largest amount in history—even more than what Mexico received from the United States and the IMF when it faced another crisis last year.”
“That’s right. But there’s one major blind spot here.”
“What is it?”

Seok-won interlaced his fingers and continued speaking.

“More than half of the announced amount is second-line funding—money that’s only provided if the crisis continues without being resolved.”
“…!”
“The foreign currency actually coming into our hands is just the 21 billion dollars from the IMF, and even that is only the first tranche of 5.5 billion dollars that we currently have in hand.”

Seok-won looked at Manager Choi Ho-geun with a skeptical expression and asked.

“Do you think that’s enough to completely resolve the foreign currency shortage?”
“…That will be difficult.”

Manager Choi Ho-geun let out a low sigh.

“Even if all 21 billion dollars from the IMF comes in, as we discussed before, once we repay the short-term foreign debt that matures by early next year, it will all drain away.”
“If that happens, you mentioned second-line funding, but additional bailout support will be provided regardless. The exchange rate may not immediately stabilize, but the situation won’t get worse from here, will it?”

Then Seok-won offered a bitter smile.

“I wish it were that simple, but there’s one major variable.”
“What do you mean…?”

As Manager Choi Ho-geun looked at him with a puzzled expression, Seok-won spoke in a slightly subdued voice.

“It’s the presidential election scheduled for the end of the year.”

Manager Choi Ho-geun furrowed his brow, his expression questioning why that would be a problem.

“The consensus was that the Democratic Justice Party candidate from the ruling party would win without difficulty, but you must be aware that the IMF crisis has made it difficult to predict the election outcome.”

Manager Choi Ho-geun nodded slightly, as if in agreement.

“A shocking national crisis—the worst since the Korean War—has occurred. If the ruling party wins without difficulty, that would be the strange thing.”

The election structure, which had initially been a one-sided race favoring the Ruling Party candidate, had evolved into an unpredictable neck-and-neck competition.
As a result, there was no shortage of talk suggesting that a change in power might occur for the first time.
Contrary to initial expectations, as the likelihood of New Era National Conference candidate Kim Jae-chun’s victory increased significantly, I heard through Secretary-General Woo Chun-il that politicians and entrepreneurs were rushing to switch their allegiances.

“Things are quiet now, but once the full-scale presidential campaign begins, opposition candidates will attack the Blue House and the Ruling Party intensely, demanding accountability for the IMF crisis.”
“They won’t pass up such an effective means of winning votes, so they’ll definitely try to make it an issue throughout the election period.”
“When that happens, they’ll raise a huge fuss, claiming to identify the causes and those responsible for the financial crisis. And this is all happening when the foreign exchange crisis hasn’t even fully ended yet.”

Manager Choi Ho-geun’s expression hardened as he listened.

“The Blue House, already in a lame-duck state due to the presidential election, along with the Ministry of Finance and Economy and the Bank of Korea—the economic control towers—will all be rendered ineffective, creating a vacuum in response.”

Seok-won shrugged his shoulders and spoke with cynical detachment.

“Without negotiating counterparts or decision-makers willing to take responsibility, why would the IBRD and ADB provide funding?”

Manager Choi Ho-geun, grasping the gravity of the situation, swallowed hard and asked.

“Was that what you meant when you said there would be significant volatility?”

Seok-won nodded in agreement and added.

“The moment hope turns to disappointment, an even greater fear will grip the market and stock prices will plummet. That’s when you sell all the positions you’ve accumulated.”
“I understand what you’re saying.”

Manager Choi Ho-geun answered with a rigid expression.

“After another major drop and once the presidential election ends, when the market hits bottom again and begins to recover—that’s the real rebound.”

Manager Choi Ho-geun’s eyes gleamed as he nodded in understanding.

* * *

Paul Townshend, the IMF Managing Director, having concluded the bailout agreement with the Korean government, descended into the hotel lobby where he was staying to meet with Kajiwara Yuki, the Governor of the Bank of Japan, in Tokyo, Japan.
As he stepped out of the elevator with his entourage, a throng of waiting journalists rushed toward him.
They surrounded Townshend, thrusting cameras and microphones at him while bombarding him with questions.

“What do you plan to discuss with Governor Kajiwara today?”

A young reporter with a press badge on one arm posed a question, and Townsend responded with an air of complete confidence.

“We plan to discuss how we will coordinate with the Bank of Japan regarding the foreign exchange crisis sweeping across Asia.”

A sharp-featured reporter immediately followed up with the next question.

“There are opinions that the funding conditions imposed on Korea, which recently received a bailout, are far harsher compared to Mexico. What is your view on this?”

Though it was a somewhat sensitive question, Townsend remained unruffled and offered a principled response.

“The IMF does not act arbitrarily or coercively toward sovereign nations. We simply require that the countries in question formulate and present their own crisis-resolution programs.”

Ministry of Finance and Economy officials who had endured intense pressure and threats from the IMF delegation just days earlier would have been speechless hearing this.

“There are rumors that the incoming government after the presidential election might request renegotiation due to the excessively harsh implementation conditions. If such a situation were to arise, would you be willing to accommodate it?”

At another reporter’s question, Townsend’s expression immediately turned serious.

“I have already obtained written pledges from all ruling and opposition candidates in the presidential election, promising to uphold the agreements made with the IMF even after taking office. Therefore, there will be no need for renegotiation.”

Townsend’s voice grew firm as he looked at the microphone thrust before him.

“If Korea fails to faithfully implement even a single agreed-upon commitment, we will immediately suspend all financial support.”

The reporter who had posed the question asked again in response to this clear warning directed at the Korean government.

“So you’re saying that if the promise is violated, you could also recover the funds already provided?”
“That is correct.”

Townsend answered without the slightest hesitation, then broke into a smile.

“However, I believe Korean politicians and citizens will not make such a foolish choice. Furthermore, though the Korean people, accustomed to high growth for so long, appear to have suffered a great shock from the cascading bankruptcies of corporations and financial institutions, I am confident that as a courageous and resilient people, they will soon overcome this crisis.”

Having said that much, Townsend took no further questions and walked toward the luxury sedan waiting outside the hotel.
Townsend’s remarks were featured prominently in Korean media the following day.

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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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