The Return of the Ruined Chaebol's Third-Generation Heir - Chapter 125

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

Regression of a Fallen Chaebol’s Third Generation — Chapter 125
“I think I’ll be coming home late tonight. So explain things well to Mom for me, alright?”
The moment I left work, I headed to a private office set up near the company. Since there was an important schedule today, I called my sister so she wouldn’t worry at home.
-Why don’t you call her directly? Mom’s already upset that she doesn’t get to see you much these days.
“I didn’t want her to worry. Just pass the message along.”
-……Okay. Come home early. Take care of yourself.
“Will do. I’m hanging up.”
I ended the call, stepped out of the elevator, and opened the office door.
“Quite empty in here.”
When I turned on the lights, a single desk sat alone in the spacious office. I tossed my bag onto the sofa and headed toward the refrigerator at one end of the room.
“Looks like someone really stocked this up.”
When I opened the refrigerator, bottled water, canned drinks, and light snacks filled every inch of space.
I chuckled quietly, grateful to Jung Tae-sung, then grabbed a canned coffee and made my way to the desk.
“Let’s see. Market information’s already starting to flow. The mood is good.”
In fact, today was the day the Federal Reserve System would announce the second round of Quantitative Easing.
Two years ago, when Lehman Brothers collapsed and the global Financial Crisis hit, the Fed had cut the base interest rate to zero percent.
Yet the economy still didn’t recover. Since rates couldn’t go lower, the Fed pulled out Quantitative Easing as an emergency measure.
The central bank would purchase government bonds directly and pour cash into the market.
In the first round, they released 1.7 trillion dollars (roughly 2.38 quadrillion won), and the economy seemed to perk up, but it slowed again this year, leaving unemployment stuck at over nine percent.
That’s what led to the second round, with a scale of 600 billion dollars—660 trillion won in our currency.
While I sat there monitoring the market, a single breaking news line appeared at the bottom of the Bloomberg screen.
[BREAKING—FOMC Decides on QE2. Government Bond Purchase Program of $600 Billion Announced]
Right after the breaking news appeared, the stock futures index on the screen began to move.
U.S. futures rose, and shortly after, Asian overnight futures followed suit.
“Money will flow to emerging markets.”
With the U.S. base interest rate effectively at zero and an additional 600 billion dollars flowing in, there’s no reason for that money to stay in America. If you borrow money at zero percent and invest it in countries with higher interest rates, you pocket the difference.
It will seek yield and escape, flowing toward emerging markets with high rates and solid economies. Foreign capital will especially concentrate on markets like South Korea, where exports account for a large share and corporate performance is strong.
Zing—
Just as I was checking the market situation, my phone rang. I glanced at the screen and immediately pressed the call button.
“Senior.”
-Did you see? QE2 just dropped.
Han Jae-yi must have been waiting, because she called right away.
“Yes, I was looking at it. What about the portfolio?”
-All set. Twelve stocks, mostly large-cap exporters.
“What’s the scale?”
-For now, we’ll deploy 60% of available cash, and add the rest once we see how the market reacts. We can’t dump it all at once—it’ll shake the market.
Han Jae-yi’s voice was trembling in a way that was unlike her.
This was Ribbon Capital’s first time taking a position of this scale in the Korean market.
Until now, everything Ribbon had dealt with was overseas markets.
-Oh, and one more thing. Have you heard of something called Bitcoin?
“Bitcoin?”
-Yeah. It’s a digital currency that circulates on the internet. The price movement is pretty scary. Just at the start of the year it was worth a few cents, and now it’s already tens of cents. Even our staff are talking about buying some with small amounts. I hear the hedge funds on Wall Street are adding it to their portfolios these days.
Bitcoin. In my previous life, I knew exactly how far it would go.
Right now you could buy it for pennies, but in the future, it would reach tens of thousands of dollars.
But now wasn’t the time to touch that.
“That’s interesting. But since I’m hearing about it for the first time, let me do some more research and we can discuss it later.”
-Okay, okay. I just thought it was neat and wanted to mention it.
“Senior.”
-Yeah?
“You’re just doing what you do best, so don’t be too nervous.”
My words were met with silence on the other end of the line, but soon Han Jae-yi laughed and spoke.
-You’re something else. How did you know I was nervous? Alright. I’ll get the position set and report separately.
“Yes, go ahead.”
After hanging up, I leaned back in my chair and stared at the ceiling. Even as I told Han Jae-yi not to be nervous, I couldn’t help my own anxiety.
I had to lay the foundation for my empire’s future right now.
“Living through the future twice—it’s not something humans were meant to do.”
I chuckled softly and went back to reviewing the materials.

* * *
“Let’s begin the meeting.”
Yeouido, Ribbon Capital’s office.
It had been over a week since we moved from that cramped one-room setup near Korea University to Yeouido, and Ribbon Capital had grown considerably, with new employees coming on board.
Han Jae-yi stood in front of the Whiteboard and picked up a marker.
“I’m sure you’ve all confirmed that the Fed announced the second phase of Quantitative Easing last night. Starting today, we’ll begin purchasing large-cap KOSPI stocks. We’ll divide the basket into three.”
She drew three circles with the marker and began her explanation.
“The first basket will be handled by Team 1, focusing on large-cap semiconductor and automotive stocks where foreign net purchases are expected to increase. This will represent 40% of the total portfolio.”
These were the stock categories where the dollars released by QE2 would hit first.
With high foreign ownership and abundant liquidity, large-scale purchases wouldn’t create much market impact.
The staff took notes, concentrating on her words.
“The next basket will be handled by Team 2, focusing on export stocks sensitive to economic cycles. We’re looking at steel, chemicals, and shipbuilding sectors, with a portfolio weighting of 35%.”line>
These stocks would rise more slowly than the first group, but once they started climbing, they’d gain momentum quickly.

“The final basket I’ll handle personally as a hedge. We’ll put 15% in cash and 10% in Put Options.”
A Put Option is a form of insurance that makes money when stock prices fall.
You pay a certain amount upfront, and if stock prices rise, you lose only that amount. If prices fall, you profit by the extent of the decline.
Han Jae-yi was betting that KOSPI would rise, but she’d also put a Put Option hedge in place as backup in case she was wrong.
“Looking at the overall allocation: 75% is long positions, 10% is hedge, and 15% is cash. If we generate additional capacity, we’ll deploy all the cash. Any questions or other thoughts?”
At Han Jae-yi’s question, the research director raised his hand.
“I have one concern. Isn’t it risky to be so confident that KOSPI will rise just because QE2 came out?”
“It’s not confidence—it’s probability.”
Han Jae-yi wrote numbers on the Whiteboard.
[U.S. Base Interest Rate 0% vs. South Korean Base Interest Rate 2.25%]
“If America releases another 600 billion dollars at zero interest rates, that money has no reason to stay in America. It will seek yields. So where will this money go?”
Han Jae-yi looked toward the staff and continued.
“Europe? That’s unlikely. The emerging economies of Europe, including Greece, are in very poor condition. And the developed nations of Europe are struggling to support those emerging countries as well.”
South America and other regions faced similar issues.
At this point, the only regions with good momentum were South Korea and Japan, which were strongly tied to China’s growth.
East Asia alone.
“South Korea has everything: the interest rate differential with America, current account surplus, and strong corporate performance. If global capital flows toward emerging markets, South Korea is the first place they’ll look.”
The staff nodded. Han Jae-yi had converted the hints she’d gotten from Kang Seon-woo into investment logic, and everyone seemed convinced.
“We’ll split the brokerage accounts across five firms. Using just one channel would spread the word.”
On the order book of the stock market, buy and sell orders stack by price and display in real time.
If a multi-billion-won order comes out through one brokerage, market participants instantly notice, and if rumors spread that a big player is buying, other institutions follow suit, pushing the price up early.
“Let’s get started right away.”
At Han Jae-yi’s word, all the staff began moving in perfect sync.

* * *
“Foreign investors really are buying aggressively.”
Two weeks later, in my office after work, I was checking the KOSPI chart. Since Ribbon began purchasing, it had steadily climbed and was approaching 2,000.
Excess money from America was flowing into our stable emerging market economy.
“CEO.”
While I was still monitoring the market situation, the office door opened and a familiar voice came through.
“Director Jung, welcome.”
It was Jung Tae-sung who entered. Coming to the office after work today was partly to check the stock price, but mainly because I had scheduled an important report with him.
“I’ll report on the results of the Seongshin Savings Bank board of directors meeting.”
Jung Tae-sung was serving as board member in my place at Seongshin Savings Bank, which Kim Jong-su—who went by North Village Ant—had acquired.
“Seongshin Savings Bank’s Project Finance Loan weighting has reached 29.2%.”
“Just before 30%, then.”
“Yes. Additionally, as you know, the Bank of Korea raised the base interest rate to 2.5% this month. The industry is expecting further increases.”
Project Financing refers to when construction companies borrow money from financial institutions before building apartments or shopping centers.
Once the building is completed and sold, the loan is repaid. If it doesn’t sell, it becomes non-performing.
When the base interest rate rises, the interest on PF loans goes up too. If construction companies can’t handle the increased interest, the loan becomes non-performing, and the savings bank bears the full burden.
“What’s the mood in the industry?”
“Not good. Three or four smaller savings banks are under FSC watch due to declining BIS Ratios. Some reportedly have PF weightings exceeding 50%.”
BIS Ratio was a number that indicated a bank’s financial capacity, calculated by dividing equity capital by risk-weighted assets.
If this ratio falls below a certain threshold, the financial authorities can order improved management or suspend operations.
50% was quite high—nearly double the figure that Seongshin was maintaining at 30%.
“There’s one thing, however, that concerns me. In the board meeting, some directors called for expanding the PF weighting.”
“Who?”
“A newly appointed director. His argument was that since net interest margin is shrinking due to rate hikes, we should raise PF to 40% to maintain profitability.”
The most basic revenue structure for a savings bank is simple: gather deposits by paying interest to depositors, then lend at higher interest rates.
The difference is the profit, called net interest margin. When the base interest rate rises, deposit interest must rise too, but if you can’t raise lending rates equally, the margin shrinks.
For savings banks, being at the frontline of financial services for the general public, it wasn’t easy to simply raise lending rates.
“It’s certainly a time when some directors might fall prey to that temptation.”
When profits shrink, there’s the temptation to expand high-interest loans like PF to make up for it.
In my previous life, savings banks had collapsed the exact same way. Chasing profitability, they’d expanded their PF holdings, and when real estate crashed, they’d toppled like dominoes.
From what I remember, more than 30 savings banks nationwide had collapsed, and the government had injected tax money to save all the depositors.
“What about Representative Yoon?”
“He rejected it. He said expanding PF to boost short-term profit was like pouring oil on fire, and Chairman Kim Jong-su also opposed it.”
Yoon In-chul was doing his job. It had been the right call to put him up as figurehead.
When Jung Tae-sung finished his report, I took a moment to gather my thoughts.
Seongshin is holding the line at 30%. Yoon In-chul and Kim Jong-su are serving as a bulwark. But that alone isn’t enough.
Even if Seongshin remains sound, if the savings banks around it collapse, fear will spread like contagion.
“Director Jung.”
“Yes.”
“Going forward, report on the board meetings monthly, not quarterly.”
“Understood.”
“And I think I need to meet with Chairman Kim Jong-su myself. Can you arrange that?”
“When would work for you?”
“The sooner the better.”
As Jung Tae-sung jotted notes in his notebook, I continued.
“And in my judgment, savings banks are going to start collapsing.”
At my words, Jung Tae-sung stopped writing and looked at me.
He was trying not to show it, but his shock was evident.
“Tell Danny to prepare. Scout out failing savings banks and identify the good ones among them.”
“May I ask why?”
“DK Capital should pick them up.”
This would be a major opportunity for DK Capital. I’d created them precisely to serve as a specialized investment firm that acquires and manages Distressed Assets, buying them at low prices and selling after restoration.
“I’ll convey that to Representative Danny.”
“Good. Things are going to get very chaotic from here on. Report to me on even small details.”
“Yes, understood.”
At my words, Jung Tae-sung bowed his head in acknowledgment, and I gave a slight nod in return.

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