A gentle piano melody played in the background of a spacious penthouse.
[SET: 587 (32)]
Sitting alone on the sofa, Seok-won held a whiskey on the rocks in one hand, watching the Thai SET index on his laptop screen. He muttered to himself,
"Fending off the attack from currency speculators is certainly a good thing, but that doesn't mean it's all good news for the Thai economy or its stock market."
In fact, it was closer to a major setback.
As the baht rose, already struggling companies saw their export competitiveness weaken further. On top of that, the sudden hike in the benchmark interest rate to 19.5% had only increased the burden of loan interest.
"Not to mention, the hedge funds' assault on the baht isn't even over yet—and now the vulnerability of Thailand's economy has been exposed on a global stage."
To make matters worse, in the effort to defend the currency, Thailand's already limited foreign reserves were severely depleted. With the threat of another economic detonation looming, investors had only one logical move.
"Sell off risky assets like stocks and move their money to safe havens. And when it comes to safe assets, it's always gold and the dollar."
Under normal circumstances, a sharp rise in interest rates might have sent money flowing into banks. But no matter how attractive the interest, putting money into savings was a foolish choice when the fall of the baht seemed inevitable.
"Unless, of course, the banks were offering interest high enough to offset a 50% plunge in the baht's value—but we both know that's not happening."
In the end, the very measures taken to defend the baht had backfired—triggering a stock market crash and a surge in demand for dollars, further draining Thailand's already scarce foreign reserves.
"And once the issue of Thai companies' foreign currency debt—totaling a staggering $87 billion—surfaces, the panic will only deepen."
Everything was pointing to a continued depreciation of the baht. There was no way hedge funds like George Soros's would back down now.
"And next time, no matter how much support comes from Hong Kong or other Southeast Asian central banks, Thailand won't be able to withstand the pressure."
After devastating Thailand and raking in massive profits, the currency speculators wouldn't stop there. They would move on—toppling other Southeast Asian economies one by one—until finally, they would sink their greedy fangs into Korea.
With a cold glint in his eyes, Seok-won took a sip of whiskey, the ice clinking gently, and set the glass down. He picked up his phone lying next to the laptop.
He scrolled through his contacts, pressed the call button, and leaned back into the sofa as the dial tone rang.
Soon, John Porter, the head of the Eldorado Fund's Japan office, answered.
[Boss. I was just about to call you.]
Still watching the laptop screen, Seok-won asked,
"You've seen the Thai SET index, right?"
[Of course.]
Porter replied, his voice laced with amusement.
[When we first signed the options contract, the SET index looked ready to break past 1,300. I never imagined it would collapse like this so suddenly.]
"What's the reaction from the Japanese securities firms?"
[No word yet, but they're probably in a state of panic. They thought they were just going to collect some sweet fees—and now they're on the hook for a billion dollars.]
Amused by Porter's excitement, Seok-won brought the phone closer to his ear and smiled faintly.
"It's a billion dollars now, but soon it'll grow to three billion."
As Seok-won corrected him, he heard a sharp gasp on the other end of the line.
[Are you saying the Indonesian and Korean markets are going to crash too?]
"Why else would we have paid such hefty fees to sign those options contracts?"
Porter instinctively wanted to ask, "Is that even possible?"—but the confidence in Seok-won's tone stopped the question in his throat.
He himself had doubted the Thai stock index would fall below 600 points, yet things had unfolded exactly as Seok-won had predicted.
After a brief pause, Porter finally spoke again.
[If things go the way you say, the Japanese securities firms that signed those contracts will be completely flipped upside down.]
"That's right. In any case, the option clauses have been triggered, so go ahead and demand payment of $1 billion per contract."
Seok-won gave the instruction with the same ease as if he were discussing dinner plans.
[Understood.]
"The contracts state they have to make the payout within a week of the claim, correct?"
[Yes, that's correct.]
Adjusting his grip on the phone, Seok-won continued.
"Then once the profits come in, hold them in the Japan branch account. We'll wait for orders from New York headquarters and use the funds to short the baht in the Tokyo forex market."
[Are you planning to switch positions this time?]
Seok-won was pleased by Porter's lack of surprise—he'd clearly anticipated that the hedge funds would strike the baht again.
"We already played all our cards in the last round, and given the current state of the Thai economy, there's no way they can maintain the current exchange rate."
Seok-won's confident tone left no room for doubt, and Porter agreed without hesitation.
[You're absolutely right. If it weren't for the support from Hong Kong, Singapore, and Malaysia, Thailand wouldn't have survived the last attack.]
"They barely did."
[I've been hearing rumors that Quantum Fund and other hedge funds are offloading U.S. Treasuries in large quantities to raise cash for a second round of attacks.]
No one could confirm the rumor for sure, but U.S. Treasury prices had indeed been showing weakness recently.
[If there's a strong chance Thailand will capitulate, how about borrowing low-interest yen to increase our investment size?]
"You're talking about a yen carry trade?"
[Exactly.]
Yen carry trade referred to the strategy of borrowing money in low-interest-rate Japan and investing it in higher-yielding assets elsewhere.
Because Japan had long been in a state of stagnation, its interest rates were significantly lower than other developed nations—and with the yen weak against the dollar, global investors were aggressively using the strategy.
"A lot of the hedge funds attacking the baht right now are using yen-based capital too," Seok-won recalled, thinking back to something Andrew had told him.
"Borrowing yen to invest won't yield much profit this time."
[What do you mean by that?]
When Porter looked puzzled, Seok-won raised the glass of whiskey to his lips and answered calmly.
"Yen carry trades only yield profit when Japan maintains low interest rates and a weak yen."
Catching on quickly, Porter immediately grasped what he meant.
[You're saying that even if we make gains, a stronger yen would eat into a large portion of the profit.]
"Exactly. If my prediction is right, the shakier Thailand gets, the more demand there'll be for safe-haven assets, and the yen could appreciate by over 10%. That would make carry trades far less attractive right now."
Along with the dollar and the pound, the yen was one of the world's major reserve currencies. History had shown that in times of crisis, it typically surged in value.
Letting out a quiet exclamation, Porter admitted he hadn't considered that angle.
[You're right. I should've accounted for currency volatility. My apologies.]
"Don't forget—now that the global economy is so tightly interconnected, any disruption in one part of the world spreads faster and more widely than ever before."
[Yes. I'll keep that in mind.]
Taking another sip of his whiskey, Seok-won lightly swirled the glass and asked,
"By the way, speaking of a stronger yen—excluding the CDS option gains, how much free capital do we currently have at the Japan branch?"
[After pulling out of various investments, we'd have around 82.55 billion yen.]
"That's about $650 million in U.S. dollars."
[That's correct.]
Nodding slightly, Seok-won leaned back into the sofa and spoke in a calm voice.
"Then use that as margin and short as many Nikkei futures as possible."
Caught off guard, Porter asked in surprise,
[You think the Nikkei is going to crash too?]
A deep smile formed on Seok-won's lips.
"Japan may deny being part of Asia, but if Southeast Asia starts shaking, Japan won't come out unscathed."
[Ah, of course. Japan has invested the most in countries like Thailand. That makes perfect sense.]
"And their corporations have only just started thriving again thanks to the weak yen. If the yen suddenly strengthens, their exports will take a hit—and that's definitely bad news for the stock market."
[You're right. The downside is wide open right now.]
Sensing a prime opportunity for profit, Porter's tone grew more enthusiastic.
[How much leverage should we use?]
"This is a sure bet. Max out the leverage—go all in."
[Understood. I'll execute it as instructed.]
Porter responded in a voice brimming with determination.
After ending the call and setting his phone down, Seok-won drained the rest of the whiskey from his glass and muttered to himself.
"Too bad I won't get to see the faces of the Japanese securities firms when they receive those payout demands."
***
Nihonbashi, Chuo Ward, Tokyo — Headquarters of Nomura Securities
Inside the president's office on the top floor, a heavy silence filled the room.
It was understandable. Out of nowhere, a staggering $1 billion loss had emerged due to the plunge of the Thai SET Index.
At the head of the room, President Hiroshi Yamakawa furrowed his brow and spoke in a voice thick with irritation.
"So you're telling me… we lost a billion dollars because of a CDS option contract with the Eldorado Fund?"
At that, Managing Director Usami, seated beside Director Nakamura, wiped the cold sweat from his brow as he replied.
"Y-Yes, that's correct."
No sooner had he answered than President Yamakawa slammed his palm down on the armrest of the sofa with a loud thud and exploded in anger.
"You should've canceled the contract—even if it meant paying the penalty—before this blew up! What kind of risk management is this?!"
His voice thundered through the room, shaking the air with fury. Usami hunched his shoulders and bowed his head deeply, unable to meet Yamakawa's piercing gaze.
"I've caused the company great harm through my poor judgment. I sincerely apologize."
"At least you know you screwed up," Yamakawa shot back coldly.
Under the weight of his sharp glare, Usami shivered slightly. The humiliation was unbearable—if there had been a hole to crawl into, he would've jumped in without hesitation.
Director Nakamura, too, sat stiffly, as if on a bed of nails.
As Yamakawa's rage simmered, he yanked down his tie knot in frustration and growled,
"You said there were two more contracts with those Eldorado bastards, didn't you?"
Usami, glancing nervously at Nakamura, replied carefully,
"Yes, we have options tied to the Korean KOSPI and the Indonesian stock market."
Yamakawa scowled, glaring at the two of them with visible disgust, and barked,
"Terminate both of them immediately!"
"I'm sorry, sir… but we can't do that," Nakamura said hesitantly, his face drawn with discomfort.
"What? Are you saying you won't follow my orders now?"
Yamakawa's eyebrows shot up, and Nakamura hastily waved his hands in denial.
"N-No, that's not it. It's just… the termination comes with a heavy penalty. It won't be easy."
"How much of a penalty are we talking about?"
"Well…"
Nakamura couldn't immediately answer, sweat beading on his forehead.
Seeing Yamakawa's expression grow increasingly twisted with fury, Usami spoke up with a faint voice.
"…The penalty is 80% of the option's notional value."
"Eighty percent?! That's $1.6 billion! Are you out of your mind?!"
"Y-Yes, sir. That's correct."
Yamakawa let out a hollow, disbelieving laugh, then glared at the two men with fiery eyes.
"What were you thinking, signing a deal like that?! Have you completely lost it?!"
Of course, a contract of that scale couldn't have been executed solely at Usami's discretion. Yamakawa himself would have had to approve it.
But bringing that up now would only get him scorched in the line of fire.
And no matter what, it had been Usami's recommendation to proceed with the deal, so he could only sit there and take the blame.
After venting his rage for several minutes, Yamakawa finally pressed his fingers to his temple, trying to steady his breathing.
"Don't tell me those other two options are going to get triggered as well."
His voice was sharp with suspicion. Usami quickly responded.
"Thailand was an outlier, sir. That kind of situation won't happen again."
"For your sakes, I hope not," Yamakawa replied coldly.
Still bowing his head, Director Nakamura couldn't shake the ominous feeling creeping in.
But there wasn't yet any concrete sign of danger. Suggesting a contract termination now—especially at the cost of $1.6 billion in penalties—would be unthinkable.
So instead, he stayed silent.