Volume 8 Final Chapter Chapter 1107 Sacrifice
In June, Chen Wenqin, who had returned to Xiangkeng for a vacation, came to Seoul.
At this time, "The Superior" had already started filming, and Nan Yi spent most of his time on the crew. He did not interfere in the affairs of the crew, but just watched silently as a bystander, understanding the functions and work intensity of each position.
When the heroine plan is implemented, Nan's annual investment in film and television dramas will be huge, starting with billions of dollars, and will grow to tens of billions in the future. Inevitably, there will be smart people who will try to dig a little out of it and put it in their own pockets.
A box lunch, a prop, an unspoken rule of giving kickbacks, a secret contract, from a small amount to a large amount, if you don't have a clear mind and let things go, it is normal for hundreds of millions to evaporate inexplicably in a year.
Nan Yi spent every day in the crew, chatting and having meals with Jin Huixiu in his spare time. As time went by, he got to know a little bit about the crew's affairs. They were all serious matters, nothing messy.
Occasionally, Nan Yi would go to the South Office and hold a meeting with staff from the South Office and other groups.
It's June now, and the situation on the Thai Baht side is already in a stalemate. South Korea will soon be lining up as well, and everyone who needs to be in position has to get ready. During this period, people from each group will come over to form a South Korea strategy team.
On June 19, the Thai baht saw another big move.
As early as last year, the IMF had predicted that Thailand was about to face a financial crisis. IMF Managing Director Michel Camdessus has visited Thailand three times since July last year. The third time was just a few days ago. He asked Thailand to stop implementing the exchange rate system that pegged the baht to the US dollar and offered to provide assistance to Thailand.
However, the Thai side did not accept his "good intentions". Instead, the Bank of Thailand announced that Thailand still had foreign exchange reserves of up to US$32 billion, which was enough to defend the Thai baht.
This news spread like wildfire, and many investors who were attacking the Thai baht temporarily stopped and waited and watched. With the scale of their funds, it would be difficult to shake the tens of billions of dollars in funds in the short term.
Some people are waiting and watching, while others think that Thailand is just bluffing. Those who think so include senior executives of Quantum Fund and Tiger Fund.
To determine whether the Bank of Thailand is lying, one need only check the Bank of Thailand's forward positions in the foreign exchange market.
Under the free floating interest rate system, a country's central bank cannot easily intervene in the fluctuation of currency value in the foreign exchange market, and naturally cannot actively participate in the foreign exchange futures market. Although the Thai baht is not a free floating currency, the Bank of Thailand cannot directly operate in the forward market, but can only operate through other commercial banks.
The Bank of Thailand will not operate through exchange banks, but only through local commercial banks. The forward contract positions of local commercial banks must be presented on the balance sheet. Since most commercial banks are listed companies, they have an obligation to disclose their financial status to the public on a regular basis. Through public channels, supplemented by certain covert means, it is easy to investigate.
Needless to say, the investigation revealed an empty city plan. Now, the bears' attack on the Thai baht became even more fierce.
"Oh no, there is more money selling Thai baht!"
At the Bank of Thailand, traders had just had a few days of leisure and held a party to celebrate the defense of the Thai baht. Just when everyone was thinking about taking a vacation to relax, the market began to fluctuate abnormally again.
"How much is the amount of funds?" the supervisor asked immediately.
The orders that will be passed on to the Bank of Thailand must be large orders worth more than 100 million baht.
“1.5 billion, $60 million in trading volume.”
"One billion baht, 40 million U.S. dollars in trading volume." A trader quickly reported the figures. "We have applied for U.S. dollars through the exchange at the Kanak Bank."
Most of Thailand's US dollar reserves are in Thai bank accounts. Commercial banks do not have much US dollar positions. When large-scale sales occur, commercial banks can only seek help from Thai banks.
"Six thousand dollars, it's not too much."
The traders' first reaction was that it was insignificant, but after the previous defense battle, their horizons were broadened a lot.
But before they could finish their thoughts, the phones on the table started ringing one by one. Their hearts sank again, and they looked at each other and quickly picked up the phones.
"Sell Thai Baht...how much...how much?"
"One billion baht?"
"1.5 billion baht, spot price?"
When the traders hung up the phone, they all felt a chill in their hearts. Everyone realized that the charge of international hot money had sounded again. However, it was strange. Where did their Thai baht come from?
How could they have imagined that PY Securities had been preparing for this day for many years and had even lent a lot of Thai baht to Quantum Fund and Tiger Fund.
“How are the futures markets?”
When the news reached Malajanuan's ears, his first reaction was to find out whether the short side was operating in both markets at the same time. If it was just selling in the spot market, there was a certain possibility that foreign funds were being remitted. If the situation occurred in both markets at the same time, it would undoubtedly be a new round of attacks.
"The situation is not good. There was a huge sell-off right after the opening, and we are fighting hard with the other side."
Malaja Nuan talked to the trader on the phone and immediately called the Prime Minister's Office, "Mr. Chavalit, I'm afraid our plan has been discovered by them. According to the reports from various commercial banks, funds in the United States have been calling them and asking them to report their positions in the forward market.
Moreover, the US capital market has reported that hedge funds are currently selling US Treasury bonds on a large scale, preparing to raise funds to attack the Thai baht again, and some funds have already been sold today. "
"What... again?"
An extremely surprised voice came from the microphone, obviously not mentally prepared for the current situation.
"I'm afraid it will be difficult for us to resist this time."
Mala Jianuan's voice was extremely bitter. He did not want to see the current situation, but the attack of international hot money was not subject to his will. The false news he released obviously did not fool the other party.
There was silence on the other end of the phone for a while. "What about raising interest rates? How about raising interest rates? Can it attract some capital inflows?"
Among the operation modes of cross-period arbitrage, there is one called risk-free arbitrage, which simply means arbitrage through the interest rate differentials of different countries. Most multinational commercial banks will adopt this arbitrage method, and Bank of South China is using it. It can reap more than US$1 billion in profits every year through this arbitrage method.
However, although this method seems to be very useful, it is necessary to consider the risk of exchange rates. Once the local currency appreciates during the arbitrage process and exceeds the arbitrage profit rate, it is equivalent to a transaction loss.
The current situation of the Thai baht is obviously not suitable for risk-free arbitrage. Although Thailand has raised the interest rate to 11%, which is twice as high as that of the United States, the forward exchange rate continues to be low for the Thai baht. Even if the interest rate is higher, it will not attract US dollar inflows.
Moreover, the interest rate level is mainly aimed at the liquidity of the domestic market. It is not convenient for a country's central bank to change frequently, unless it encounters inflation, otherwise, the economy will be in big trouble. Moreover, Thailand's recent interest rate hike has dealt a heavy blow to Thailand's financial industry. If the interest rate is raised again, the entire financial industry will collapse directly.
Malakanuan translated the professional terms into plain language and explained them to Chavalit. As soon as Chavalit heard it, he understood that Malakanuan was politely refusing to raise interest rates.
Compared with the political pressure from allies, Chavalit was more concerned about Thailand's economic situation, so he gave up the idea of raising interest rates and asked, "Is there any other way?"
Malajianuan felt like he had gall in his mouth, full of bitterness. If there was a solution, he would have proposed it long ago. Why would he wait until now?
"Mr. Chavalit, I have no other choice."
"Got it. I'll think about it."
Chawali's voice was calm and he hung up the phone.
Listening to the beeping sound coming from the microphone, Mala Jia Nuan suddenly realized that he had overlooked a very scary trading method - foreign exchange swaps.
Foreign exchange swap is a type of financial swap product, which means that the two parties to the transaction exchange a group of funds with each other within a certain period of time according to pre-agreed exchange rates, interest rates and other conditions to achieve the purpose of risk avoidance.
Generally speaking, foreign exchange swap transactions are not limited to the physical exchange of two currencies, but will involve the inclusion of credit, that is, releasing funds through foreign exchange swaps, creating a false prosperity with a large influx of funds, and then asking for the loan back when the bubble bursts. In this way, a large amount of foreign exchange will be consumed in a short period of time.
Simply put, by conducting false trade and foreign exchange swap transactions with financial institutions outside of Thailand, they circumvented the supervision of the Bank of Thailand and obtained huge amounts of funds. In essence, they borrowed funds from financial institutions outside of Thailand and then converted them into local currency and put them into the market.
Thailand's exchange rate is a pegged exchange rate system, and the exchange rate changes between the Thai baht and the US dollar are very small. There is no need to consider foreign exchange swap hedging too much. However, in fact, Thai companies are very keen to conduct swap transactions in the foreign exchange market. The reason is very simple: foreign financing costs are lower.
Thai companies borrow US dollars from foreign financial institutions through foreign exchange swap transactions and exchange them into Thai baht, and then invest in high-yield industries such as stocks and real estate. In this way, they can raise funds at a lower cost and circumvent regulations on capital inflows.
If Thailand's stock market and real estate continue to boom, the scale of swap transactions will expand greatly. However, if there is a slowdown in earnings or sharp fluctuations in exchange rates, foreign financial institutions will immediately demand the repayment of loans and end the transactions.
The entire transaction is essentially a lending process, not a simple hedging. Therefore, it is very necessary for foreign financial institutions to end the transaction in advance, and there will usually be similar clauses in the contract.
According to the logic of financial market operation, if Thailand raises interest rates again, the expected returns on investment in the stock and real estate markets will be further compressed, foreign financial institutions will intensify their credit panic and withdraw funds from Thailand at a faster rate.
"If there is a conspiracy here, the currency attack launched by hedge funds is probably just a smokescreen." Mala Jia Nuan couldn't hide her inner shock and couldn't help but take a breath of cold air. "No wonder the recent loss of foreign exchange reserves is so large, it's all planned, all planned!"
Malajanuan's guess was correct. Indeed, everything was planned in advance. As early as March, Quantum Fund bought a large number of put options, borrowed a large amount of Thai baht in the form of swaps, and sold Thai baht futures and forwards. Quantum Fund expected that the counterparty would sell Thai baht spot to hedge the derivative contracts, so as to create pressure for the Thai baht to depreciate with the help of others.
Thailand has actually fallen into a trap, and the dragnet has covered it tightly, waiting to be tightened step by step and harvested slowly.
A few hours later, Chavalit's "consideration" paid off. The Thai Ministry of Finance held an emergency press conference, and Finance Minister Wirawan announced his resignation at the press conference.
As soon as the news came out, it shocked all parties in an instant. Fortunately, the news was released during the market closure, otherwise it would definitely cause violent market fluctuations. However, everyone understands that tomorrow's market will inevitably react badly to this.
As for foreign investors, they need to consider accelerating the withdrawal of their investments from Thailand. The Minister of Finance has previously made public statements many times vowing to defend the Thai baht to the death.
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Sacrifice: A whole animal used for sacrifice, an animal used for an oath, or a feast. Now it refers to sacrificing one's life for a just cause, or giving up or damaging the interests of one party for the benefit of another.
