RBCT Chapter 165 Capital Entry
Chapter 165 Capital Entry
Chapter 165 Capital Entry
On May 19, as the morning fog in Manhattan, New York, had just dissipated, Ernst was already standing in front of the Ernst Asset Management headquarters building.
Three days had passed since the Goldman Sachs cocktail party. During those three days, he was like a tightly wound spring, appearing at the company building on time every morning and not returning until late at night.
The elevator doors on the sixth floor slid open slowly, leading into a closed room at the end of the corridor. A wave of stale air, mixed with caffeine and nicotine, hit us.
Even with the most advanced air conditioning purification system available, it still couldn't dispel the unpleasant odor.
Whenever a financial institution makes a major move that could shake the market, its core team is isolated in these small, dark rooms, cut off from all private contact with the outside world, and engages in a series of silent capital battles in this enclosed space.
In a space of over 200 square meters, an ultra-high-definition screen composed of 40 spliced screens occupies the entire north wall. The real-time Thai Baht to US dollar exchange rate curve is like an enraged silver snake, violently twisting between green and red.
Although the daily fluctuations are always kept within a very small range, they are still enough to make any seasoned trader's palms sweat.
"Good morning." The voice of O'Shea Ricardo, head of the hedge fund department, came through. Ernst looked up and the first thing he noticed was the other man's heavy dark circles under his eyes.
"At three in the morning, the Bank of Thailand released another $500 million from its foreign exchange reserves." Ernst nodded slightly, then received a data report from the other party, which contained all the details of the Bank of Thailand's foreign exchange reserves.
On May 14, facing an overwhelming influx of international speculative capital, the Thai government put up a strong resistance and injected US$5 billion of its foreign exchange reserves to buy back shares of Thai Railways.
However, the scale of international speculative capital is astonishing, and the Thai central bank's current foreign exchange reserves of less than 30 billion US dollars are simply insufficient; it's like a mantis trying to stop a chariot.
Under repeated attacks from international speculative capital, the Thai Baht exchange rate quickly fell to a historic low of 27 to 1.
The Bank of Thailand realized that international speculative capital was constantly mortgaging US dollars to borrow from Thai banks for Thai Railways. If Thailand simply kept depleting its foreign exchange reserves to take over Thai Railways, the final result was self-evident.
It must be the collapse of the Thai Railway, the collapse of the currency, and the flash crash of the Thai economy.
On May 15, the Thai government took decisive countermeasures, announcing two measures to rescue the market.
First, foreign institutions within Thailand are prohibited from lending Thai Railways to domestic financial institutions.
Second, the offshore lending rate of Thai Railways was drastically increased from 10% to 1000%.
In order to maintain their short positions, international speculative capital must continuously borrow from Thai Railways.
A 1000% lending rate is equivalent to a daily interest rate of 3%.
To maintain a billion-dollar fund, the daily interest would be thirty million dollars.
Ernst Asset Management used a leverage ratio of 20 times, using 200 million US dollars to leverage 4 billion US dollars, with daily interest of 120 million US dollars.
On May 16, to prevent the collapse of the Thai Railway and the resulting financial turmoil in Southeast Asia, the Hong Kong Monetary Authority, the Monetary Authority of Singapore, and the Bank of Thailand jointly invested US$12 billion to intervene in the Thai Railway market and buy back shares.
The Thai Railway Exchange rate, which had fallen sharply, has stopped falling and rebounded, returning to a level of 25 to 1 against the US dollar.
Everything seemed to be developing in the direction the Thai government wanted, while international speculative capital became the targets of exploitation.
That's why Ernst, who was worried, didn't leave New York and stayed here for the past three days.
"No wonder the traders are the world's most prolific League of Legends players. The ability to make or lose hundreds of millions of dollars every minute is just too damn exciting."
Even Ernst couldn't help but swear.
Facing these enormous numbers every day, the sensory stimulation is so intense that it's hard not to get an adrenaline rush.
The most effective way is to rush out, but you can't summon prostitutes in a dark room, so you can only watch movies and solve the problem yourself, using magic to defeat magic.
O'Shea Ricardo was much calmer than him. Although it was his first time experiencing such a large-scale event, he had been through similar things many times before, so he wasn't as nervous.
"Don't worry, boss," O'Shea Ricardo reassured him. "Although it seems like our forex positions are losing money every day, and the losses are unimaginable, in reality, over the past few days, our losses are less than thirty million US dollars."
This brings us to Ernst Asset Management's hedging strategy. Not only did they establish huge short positions in the Thai Railway in both the forward and spot foreign exchange markets, but they also went long in the interest rate derivatives market to hedge their risks.
Oshe Ricardo knew the Thai government wouldn't surrender easily and had anticipated this move, fearing a sharp interest rate hike by the Bank of Thailand that would increase financing costs.
The Bank of Thailand's unprecedented interest rate hike has generated substantial profits for Ernst Asset Management's long positions in interest rate futures and options, almost offsetting the sharp rise in Thai Railways' borrowing costs.
Ernst understood this, and he was quite familiar with finance.
But he had only ever heard of such a large undertaking in his two lifetimes; this was the first time he had ever participated in one.
It would be a lie to say you don't feel any emotional fluctuations when you see the numbers constantly changing in your account.
"How long do you think this tug-of-war will last?" Ernst asked, his gaze never leaving the screen on the wall.
He actually remembered clearly the exact time when Thai Railways finally collapsed, but he was more interested in knowing the judgment of the head of the hedge fund department at Ernst Asset Management, and also to see his abilities.
"The Bank of Thailand won't be able to hold on for long," O'Shea said, expressing little optimism that the Thai Railway's exchange rate could be preserved.
"Although some small speculative funds were swallowed up due to strategic issues, the vast majority of international speculative funds, like us, have achieved risk hedging."
O'Shea Ricardo's eyes suddenly sharpened, and he said decisively, "On the other hand, Thailand's foreign exchange reserves are now less than $120 billion, which will definitely not last until the end of the month, and may not even last a week."
"However, the Thai government definitely has other tricks up its sleeve, and we need to respond accordingly."
Ernst nodded. What the other person said was pretty much what he knew; he was a talented person.
This trader, who has spent ten years navigating the complexities of Wall Street, truly possesses a talent for discerning the essence of the market.
"What about our overall profit? How much is it now?"
The deficit refers to the hedging losses in this Thai Railway currency war, but Ernst Asset Management has not only made moves in this area.
Interest rates have only risen, and the Thai government has managed to maintain the currency, but what about the housing market?
Thailand's real estate bubble has long been an open secret, and this round of financial turmoil will inevitably trigger a chain reaction.
Oshe Ricardo's hedge fund team also shorted the Thai property market.
O'Shea Ricardo waved and asked his deputy for a detailed data report.
After the other party delivered it, Ernst took it over immediately. It was so densely packed that anyone not in the financial industry simply couldn't understand it.
This isn't the kind of final summary report; it's a collection of various fluctuation data.
After examining the data for a while and doing some mental calculations, Ernst concluded, "Did they make over seventy million dollars in profit from the housing market?"
In other words, since entering this Thai railway currency war, Ernst Asset Management has made a total profit of about 40 million US dollars.
It's only been a few days, and the profits are outrageous!
However, such events don't happen all the time; they are purely accidental.
"We have limited funds invested in the Thai property market, otherwise we would have made more profit."
It's true that there's more profit to be made, but Ernst also knows that even with more capital, the profit from the housing market will at most be no more than one or two hundred million dollars.
The foreign exchange market is the main focus, and a larger portion of funds will be used there.
Just then, the secretary with the huge butt walked in, wearing ten-centimeter high heels.
This secretary, who was of German descent, always wore well-tailored suits that perfectly accentuated her striking figure, causing several young traders to unconsciously swallow their saliva.
She walked straight to Ernst and whispered a few words in a voice only the two of them could hear.
Ernst's brows furrowed instantly, and he turned and headed to his office.