RBCT Chapter 159 Asian Financial Crisis
Chapter 159 Asian Financial Crisis
Chapter 159 Asian Financial Crisis
The flight from Los Angeles to New York takes about five and a half hours. Ernst departed around 5 p.m. and after crossing the twilight and night of the North American continent, landed smoothly at John F. Kennedy International Airport around 10 p.m. He finally arrived at his mansion on the Upper East Side at 11:30 p.m.
He slept soundly through the night. After breakfast, he changed into a dark gray pinstripe suit and drove through Manhattan to Ernst Asset Management in Queens.
A month ago, this was just an empty office, but now it has become a new powerhouse quietly emerging in New York's financial circles.
The moment you push open the revolving door, the cool air from the central air conditioning, mixed with the aroma of coffee, wafts out.
In stark contrast to the desolation when I left last month, the company now finally resembles a financial institution.
Employees in suits hurried about carrying folders, phones rang incessantly at the open workstations, and shouts occasionally came from the glass cubicles.
Arriving at the CEO's office at the top, Jane Fraser, the blond secretary was giving a low report into the intercom. Upon seeing Ernst, she immediately stood up.
Although Ernst had never met him, that didn't stop the other party from recognizing that the person in front of him was his boss.
Is Jane inside?
"Sir, the president is in a meeting in the hedge fund department on the fifth floor," the secretary quickly replied.
"Lead the way," Ernst instructed, adjusting his cufflinks instead of going in to wait.
Along the way, Ernst observed the office environment. Although the exterior of the building still retains the brick and stone texture of the 1920s, the interior is full of fashion and technology.
Inside the glass partitions on both sides of the corridor, the K-line charts on the electronic screens gleamed coldly, and there were displays and electronic products such as computers everywhere.
As the elevator reached the fifth floor, Jane Fraser's silhouette was perfectly reflected in the frosted glass outside the conference room.
The female CEO, a graduate of an Ivy League school, wearing a crisp white shirt, spotted him immediately.
"Ernst?" Jane's eyes flashed with surprise as she pushed open the door, then she stepped aside to let him in.
More than twenty pairs of eyes in the conference room turned to look at him. Embarrassingly, he didn't recognize any of them, including O'Shea Ricardo, the head of the hedge fund department.
"Never mind me, continue with yourselves." Ernst pulled over a chair, the legs scraping softly on the floor.
Jane Fraser glanced at him and said awkwardly, "Um...we were just about to adjourn the meeting."
She nodded to the crowd, waved, and only let O'Shea Ricardo leave.
Once only the three of them remained in the conference room, Ernst asked, "Is there some big plan?"
As CEO of Ernst Asset Management, Jane Fraser had no need to personally attend meetings of the hedge fund department; this constituted overstepping her authority and was a major taboo.
Unless something major has happened, she couldn't possibly be here.
This is why Ernst came directly over after hearing that the other party was having a meeting in the hedge fund department.
Jane Fraser pulled a document from the folder on the table in front of her, handed it to Ernst, and said in a deep voice, "Soros has made his move."
Ernst paused for half a second on his knee as he tapped his fingers, then sat up straight, intrigued. "Tell me more about it."
"Just three days ago, short sellers led by Soros' Quantum Fund began to sell off Thai Railways shares in batches, and in three days they sold off a total of $35 billion worth of Thai Railways shares."
"The spot exchange rate of Thai Railways has fallen repeatedly, breaking through the floating range set by the Bank of Thailand."
Jane Fraser reported the details, while Ernst flipped through the documents that had just been handed to him, which contained transaction records and various related fluctuation curves.
However, on the last few pages, his finger stopped, and he discovered something interesting.
"Is Soros buying Thai newspapers?"
"Not just newspapers." Jane Fraser pressed the projector switch, and a long list of acquisitions immediately popped up on the screen. "In the past three months, Quantum Fund, through offshore companies, has invested in 47% of Thailand's print media, as well as a portion of its television station shares."
"A war of public opinion." Ernst chuckled softly, his fingertips tapping out a rhythmic pattern on the table.
“That’s right,” Jane Fraser nodded. “Since the first failed attempt to sell Thai Railways, international speculative capital and the Quantum Fund have been investing in or acquiring newspapers in Southeast Asia for the past three months.”
"Thailand has been the most severely infiltrated." She pulled up a front-page photo of the Bangkok Post, the headline in bold Thai that he couldn't understand at all, accompanied by a cartoon of soldiers carrying old-fashioned rifles.
Jane Fraser explained, "These are all reports from local Thai media. The general idea is that the Bank of Thailand is like a sword and a rifle, while international speculative capital is like airplanes and cannons, so the Thai Railway is simply no match for them."
"The entire international capital market is now on Soros's side, and even many Thai banks and investment institutions are shorting their own country's currency."
Capital knows no borders; this is profiting from national disasters.
However, none of this mattered to Ernst. All he needed to know was that Taitie was doomed this time.
"Let me tell you about our plan."
No wonder Jane Frazier came to the hedge fund department; now it's time for them to step in and make their mark.
This time, Jane Frazier didn't speak, but instead gestured to O'Shea Ricardo, the head of the hedge fund department.
He looked to be around thirty-five or thirty-six years old, dressed impeccably in a suit, and exuded a vibrant energy that made you feel his vitality at first glance.
The other party presented a blue document stating, "Based on Thai policy and the previous encounters between Soros and the other party, our strategy is to launch a multi-pronged attack, targeting Thai Railways at multiple points in the spot foreign exchange market, forward foreign exchange market, exchange rate, and interest rate."
O'Shea Ricardo was afraid Ernst wouldn't understand and wanted to explain further.
However, Ernst waved his hand and asked, "What is the foreign exchange margin requirement in the forward market?"
O'Shea Ricardo paused for a moment, then realized the other person was a sensible man and replied, "5%."
Ernst pondered for a moment, then looked up at the other person. "How much capital do we plan to invest in the forward market?"
"Two hundred million dollars," O'Shea replied without hesitation.
A 5% margin means that this $2 million can leverage a total of $40 billion, or 20 times leverage.
As Ernst looked at the specific plans in the blue book, a hedging model quickly formed in his mind.
If Ernst Asset Management has $5 billion in funds, it can first use $200 million as collateral to sign a $4 billion contract with a Thai bank in the forward market.
The contract stipulates that after one or three months, at the current exchange rate of 25 to 1, Ernst Asset Management can exchange 1000 billion Thai Railways for 40 billion US dollars from the Bank of Thailand.
Then there's the spot market. Ernst Asset Management currently has $48 billion in hand, and it will use $40 billion as collateral to secure a loan of 1000 billion Thai Baht.
The $100 billion loan to Thai Railways will be sold directly on the spot market for $4 billion.
With such a large sell-off, Thai Railways is bound to experience some fluctuations.
If the Bank of Thailand is unable to withdraw funds from the Thai Railway and maintain its exchange rate, the exchange rate will fall to 50 Thai Railways to 1 US dollar.
The four billion US dollars held by Ernst Asset Management can be converted into 2000 billion Thai Railways, of which 1000 billion Thai Railways will be used to repay Thai Railways' loans and recover the four billion US dollars that were pledged.
The remaining 100 billion Thai Baht can be used to execute forward contracts, convert into another 4 billion US dollars, and retrieve a 200 million US dollar margin.
In other words, Ernst Asset Management invested $42 billion initially, but ultimately received $82 billion.
Of course, the drop in Thai Railways' stock price couldn't have been that large; it was just a procedural maneuver.
Moreover, Thai banks will definitely raise interest rates to protect the exchange rate, so the remaining $8 million will be used to go long on the exchange rate and interest rate markets to achieve hedging.
恩斯特大概记得泰铁最高时汇率超过了32比1，以30比1来计算，这四十亿美元可以大赚8亿美元左右。
However, considering the Bank of Thailand's resistance and the interest paid by the Thai Railways through the loan, the final surplus will only be around US$500 million.
He sighed inwardly, "I still don't have enough money."
If, like the Quantum Fund, hundreds of billions of dollars were mobilized at once, Ernst Asset Management could reap at least two to three billion dollars in returns.
But it doesn't matter. If Thailand alone can bring in $500 million, then traveling throughout Southeast Asia will surely yield billions of dollars.
Of course, the premise is to avoid Hong Kong Island, otherwise the returns will be greatly reduced.
Ernst glanced at the red-brick buildings of Queens outside the window, then turned back and asked, "How much readily available cash does the company have right now?"
Jane Fraser, intimately familiar with the company, answered without hesitation, "The total assets under management have exceeded 67..."
"US$100 million, cash flow of US$53 billion."
"So many?" Ernst exclaimed in surprise; he hadn't expected that.
"Besides the $30 billion from Boston, where did the rest of the assets come from?"
Jane Fraser looked at Ernst and smiled, saying, "You probably underestimate your own reputation; it's practically the best fundraising prospectus. Knowing this is your financial company, many Wall Street banks have entrusted us with managing funds."
"Citigroup was the most generous, contributing $300 million, Goldman Sachs contributed $200 million, and there were also various family trusts, etc."
"And because of your fame, our first $5 million private equity fund was quickly closed. We originally planned to launch a second $10 billion private equity fund, but we have now suspended that plan."
Ernst quickly realized, "Because of Titanic?"
The reason these people are willing to spend money is because Ernst has been creating wealth in the past.
However, given the overwhelming negative reports surrounding "Titanic," launching a new round of private equity investment now is unlikely to be very effective.
Jane Fraser looked at Ernst and smiled without saying a word.
However, Ernst saw this as an opportunity to take advantage of the wealthy.