Golden Spoon Investment Portfolio - Chapter 404

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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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404. Now it’s certain.

November 11th, 1997.

[Industrial Bank Indefinitely Postpones 2 Billion Dollar Bond Issuance]

The bad news transmitted from across the Pacific after the weekend struck a devastating blow to the already anxious Korean stock market and foreign exchange market.
On the Foreign Exchange Bank Trading Floor in Euljiro, Jung-gu, Seoul, phones rang incessantly, and the shouts of traders with veins bulging from their necks made the place resemble a battlefield.

Ring! Ring!

“Twelve bought at 51.8!”
“What did you just say!”
“No. Ten, not five!”
“Okay. Done!”

Na Un-hak, a fourth-year foreign exchange trader, continued trading without even time for lunch or a bathroom break.

“Damn it. It’s gone up again!”

Na Un-hak, his nerves completely on edge, grimaced as he watched the dollar-won exchange rate displayed on his monitor.
Then he pressed the receiver in his left hand to his ear and spoke rapidly.

“The exchange rate has jumped to 52.3, so we can’t execute the trade at the quoted price.”
[1,552.3 won? Why is it so expensive?]

The customer on the other end of the line shouted indignantly as if it were absurd.
Understanding the customer’s panic at the sudden rate jump, but hearing complaints directed at the wrong target, Na Un-hak felt irritation rising within him as well.
Taking a deep breath to barely suppress his frustration, Na Un-hak gripped the receiver and asked again.

“It looks like the upward trend will continue at least for today. What would you like to do?”
[Sigh. This is driving me crazy.]

The other party sighed and spoke as if there was no choice.

[I need dollars urgently, so buy them at that price.]
“Please wait a moment.”

Even as I spoke, Na Un-hak quickly tapped the keyboard in front of me and entered the order.
The moment the transaction confirmation appeared on screen, Na Un-hak said tersely.

“Transaction complete.”

The moment I hung up the receiver, the phone rang loudly again, as if it had been waiting.
Continuing to trade frantically like this, I could only catch my breath after the closing bell rang and the foreign exchange market shut down.

“Phew.”

I slumped into my chair like a water-soaked sponge.
My throat ached from how much I’d been shouting all day.
I picked up a mug and wet my throat with water, then gazed at the dollar-won exchange rate on the monitor and let out a low groan.

[USD/KRW : 1,597.31
(+32.02)]

The exchange rate had skyrocketed by 32 won in a single day—it was enough to drive anyone mad.

“I thought things would improve once the IMF negotiations ended. This is absolutely maddening.”

As I wore an expression mixing worry and exhaustion, a groan came from the seat beside me.

“Ugh. My blood sugar’s crashing.”

Seol Gyeong-sik, a junior trader, pulled a candy from a container and popped it into his mouth, then offered one to me as well.

“Would you like one too, senior?”
“Thanks.”

I took the candy and popped it in my mouth—a sweet strawberry flavor spread across my tongue.
Seol Gyeong-sik, whose necktie had long since disappeared and whose white shirt had one button undone, muttered with a slightly darkened expression.

“You don’t think it’ll break through 1,600 won tomorrow, do you?”

I glanced at the monitor and replied in a subdued voice.

“Considering the won keeps weakening in the over-the-counter market… we need to be prepared for the resistance level to break.”

Seol Gyeong-sik exhaled softly without a trace of surprise, as if he had already suspected as much himself.

“It must be the fallout from Industrial Bank postponing their Yankee bond issuance in New York.”

Na Un-hak spoke with a cynical edge to his voice.

“Postponement is just a polite word for it—the truth is no one wanted to buy the bonds, so the whole thing fell through.”
“From what I heard, they offered it with a spread of 3 to 3.5 percentage points over LIBOR. If that won’t sell, it’s basically being treated as junk bonds.”

Na Un-hak responded to Seol Gyeong-sik’s heated expression with a bitter smile.

“That’s how we have to see it. With a state-owned bank like Industrial Bank in this situation, it’s no exaggeration to say that other commercial banks and private enterprises issuing bonds to borrow foreign currency has become virtually impossible.”

Na Un-hak crunched the candy in his mouth and pointed with his chin at the monitor displaying the exchange rates.

“And this is the result.”

Seol Gyeong-sik’s face filled with worry as his shoulders sagged.

“What’s going to happen next?”
“I don’t know either. One thing I’m certain of is that what’s happening now is more serious than it was before the IMF negotiations.”

Seol Gyeong-sik hesitated for a moment before asking carefully.

“Surely they won’t declare a moratorium, will they?”

Na Un-hak said nothing and closed his mouth.
When silence answered a question that had hoped for denial, Seol Gyeong-sik’s expression hardened further.
Just then, a trader across the way suddenly cried out loudly.

“Wait. Is that really true!”

The trader, his face etched with shock, jumped to his feet with the receiver in one hand and shouted.

“Hansan Group has filed for court receivership!”
“What!”
“Good heavens….”
“I had a bad feeling, but it really came to this.”

The moment they heard the news, everyone shook their heads without hiding their shock, pouring out sighs and laments.
It wasn’t just any company—Hansan Group, a member of the Hyunwoo conglomerate and ranked 12th in the business world, had collapsed. There was no way around their despair.
As the Trading Floor grew noisy with murmurs, Na Un-hak spoke with a stiffened expression.

“This settles it.”
“Settles what?”
“The 1,600 won barrier breaking tomorrow.”
“Right. It will.”

Seol Gyeong-sik, who had been nodding with an exhausted expression, suddenly lifted his head as a thought struck him.

“Come to think of it, wasn’t Hansan Group’s primary bank us?”
“…!”

Na Un-hak’s face contorted as he realized the fact he’d forgotten.

“Damn it. I thought it was someone else’s fire, but it wasn’t.”

As their primary bank, it was obvious as day that the fallout from Hansan Group’s default would splash onto Foreign Exchange Bank as well.

* * *

Late in the early morning.
When a cell phone’s ringtone pierced the silence, Seok-won, lying alone on a spacious bed, stirred.
But as the persistent ringing continued, Seok-won finally stretched his arm while lying down, fumbling across the nightstand before grabbing his phone.

“Mm. Hello.”

As I answered the call with my eyes still closed, half-asleep, Landon Shore’s voice came through.

[Boss. It’s me.]

I barely opened my eyes and checked the time displayed on the phone’s screen.

“What’s the matter at this hour?”
[I apologize for calling while you were sleeping. I had urgent news to inform you of.]
“Tell me.”
[Moody’s just downgraded Korea’s long-term credit rating from A3 to Baa2—a two-notch drop all at once.]
“…!”

Seok-won’s eyes flew open at the shocking news, and he pushed himself up into a sitting position.

“Is that really true?”
[Yes, it is.]
“Hmm….”

I let out a heavy sigh, my voice hoarse.
Earlier, along with S&P, Moody’s had downgraded Korea’s credit outlook from stable to negative and lowered the short-term sovereign credit rating from Prime-1 to -2.
However, the long-term sovereign credit rating had maintained an A3 grade for eleven years since Korea was first evaluated in 1986.
But to have it drop by two notches all at once was truly shocking.
Sleep vanished from me in an instant, and I spoke with a grave expression.

“Lowering the long-term credit rating means they believe the foreign exchange crisis won’t end in the short term and will drag on for a long time.”
[That’s correct.]

It meant they were taking a pessimistic view that Korea’s economy wouldn’t recover and would fall into prolonged stagnation, making the situation far more serious than when the credit rating had been downgraded before.

[Moreover, the credit ratings of thirty-one Korean foreign currency bond-issuing institutions, including the Industrial Bank, have been downgraded en masse.]

Hearing this, I furrowed my brow.

“It’s essentially the same as openly telling people to treat Korean bonds as garbage and not buy them.”
[They’re not quite junk bonds yet, but it’s true that issuing bonds becomes difficult once the credit rating falls to Baa2.]
“New issuances will be difficult, and existing bond prices will plummet as well.”
[In fact, the moment Moody’s announcement came out, the yield on the ten-year bonds issued by the Industrial Bank surged by 950 basis points, showing signs of panic selling.]

Hearing the situation Landon had conveyed, I clicked my tongue.

“950 basis points means it jumped by 200 basis points all at once.”

Rising interest rates meant the price of already-issued bonds had fallen by that amount.
A brief fluctuation wouldn’t have been a major concern.
But if Korean bonds were likely to weaken over the long term, investors holding bonds would rush to sell their positions before suffering further losses.
Once panic selling poured in, a vicious cycle would unfold—yields would rise further and prices would plummet.

[According to reliable information, S&P will also downgrade Korea’s credit rating further following Moody’s.]
“This is the worst-case scenario.”

Seok-won furrowed his brow as he responded.
Korea was barely clinging to survival, and now the two rating agencies had delivered a devastating one-two punch.
Seok-won rapidly organized the situation in his mind, his eyes sharpening with intensity.

“This is essentially setting up Korea to be picked clean. What about the movements of the Wall Street Hedge Funds?”
[Once the IMF bailout was decided, the hedge funds that had liquidated their positions and withdrawn are now selling won again after hearing the downgrade news—and they’ve even started short-selling Korean bonds.]

As if he’d expected as much, Seok-won answered calmly.

“They’ve gotten another chance to strip Korea bare. There’s no way they’d let that slip through their fingers.”
[That’s right.]
“Has Quantum Fund entered a short position too?”
[They’ve been quiet so far.]
“That’s strange. They wouldn’t just sit back and watch such a golden opportunity.”

Landon Shore offered his perspective in response to Seok-won’s puzzlement.

[The Southeast Asian countries that were attacked by hedge funds first—Malaysia and others—are pointing fingers at George Hamilton and Quantum Fund as the culprits behind the currency crisis and pouring out fierce criticism. Perhaps they’re being cautious.]

Indeed, Malaysian Prime Minister Syed Arif and George Hamilton had exchanged sharp criticisms through media interviews.
On top of that, leaders and senior officials from other Southeast Asian nations were also harshly condemning George Hamilton through the media and international conferences.

“George Hamilton wouldn’t be intimidated by criticism—he’d treat it like a medal earned from raking in massive profits.”
[That’s true.]

If he were the type to be shaken by outside noise, he never would have earned the title of Wall Street legend.
And ever since he attacked the Bank of England, this level of criticism had become second nature to him.

“Either way, the won exchange rate is going to spike sharply again.”
[It will. The New York Foreign Exchange Market has already broken through 1,600 won.]

Seeing the exchange rate had already breached the resistance level, Seok-won bit his lower lip firmly.

“Keep monitoring Quantum Fund’s movements and report the situation to me regularly.”
[Understood.]

After ending the call, I got out of bed and headed to the kitchen, opening the refrigerator to pour myself a cool glass of water.

“Phew.”

After finishing the entire cup, my thirst dissipated and my mind felt remarkably clear.
With the coffee from the machine in hand, I entered the Trading Floor and immediately checked the Bloomberg terminal.
As expected, articles and data related to Moody’s credit rating downgrade were flooding in.
The silver lining was that Korea wasn’t the only country facing a credit downgrade—Moody’s had lumped Thailand and Indonesia, which were also caught in the currency crisis, together in the same downgrade.

“I avoided being singled out, but I’m still prey for the hedge funds. That hasn’t changed.”

Though dawn was still hours away, sleep had already completely abandoned me.
With a grave expression, I scanned the information flowing through the Bloomberg terminal, monitoring the unfolding market conditions.

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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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