Soros and the Asian financial crisis; ; In February 1997, Boorman, the International Monetary Fund, warned that only two years after the Mexican financial crisis, a large amount of hot money was being injected into emerging markets such as Asia at a record pace, and "irrational enthusiasm" was widely appearing in these markets, which might lead to painful shocks.
However, Burman's voice was still not heard, which made Soros finally make up his mind to fight against the power of national groups in Southeast Asia by one person.
Faced with the prevalence of currency market speculation in various countries, the central banks of Southeast Asian countries have been hesitant about the change rate of market value, especially worried that hot money will flow out as quickly as it flows into China, which will lead to sharp fluctuations in exchange rates. But at this moment, it is very difficult to screw on this reopened capital faucet. The central banks of Southeast Asian countries have reached their final stage.
Soros, who seized the opportunity, went out.
However, this time Soros and his subordinates are not only cautious, but also choose the Thai baht, which has become the regional currency since the late 198s. Although the interest rates in Indonesia and the Philippines are higher than those in Thailand, the Indonesian exchange rate is often manipulated by Indonesian officials, which makes it difficult to speculate. The Philippines also has more controls on the foreign exchange market, and it is also inconvenient to let go of its hands and feet to fight a big battle to decide the outcome. In contrast, Thailand has the highest degree of financial market opening among Southeast Asian countries, with free capital entry and exit; In addition to the high interest rate, the Thai baht has been pegged to the US dollar for a long time, and the exchange rate is quite stable, with the least risk. On the other hand, Thailand's "false" economic prosperity is the most prosperous, and the depressed real estate market is dragging down the original financial industry, so the market value of the Thai baht is actually the most unstable and easy to break.
Soros's attack on Taimu lies in his fancy to the above advantages, which is called "catching the thief first and catching the king first". After breaking the fortress of Taimu, he can completely sweep Southeast Asia. In this way, Soros commanded his men to secretly transfer funds to Southeast Asia, so that when the last time is ripe, they can land in Southeast Asia on a large scale and kill these people who are still dreaming.
Soros has finally quietly declared war on Southeast Asian countries.
On March 3, 1997, the Central Bank of Thailand announced that nine domestic finance companies and one housing loan company had problems of low asset quality and insufficient liquidity. Soros and his men thought that this was a hint of deeper problems that might occur in Thailand's financial system, so they preemptively ordered the sale of shares of banks and financial companies in Thailand, and depositors made large withdrawals from all financial and securities companies in Thailand. At this time, the western impact funds headed by Soros, which were waiting for a large number of Southeast Asian currencies, jointly sold the Thai baht on a large scale. Under the siege of many western "heroes", the Thai baht was irresistible for a while and kept falling, jumping to a minimum of 26.7 baht to the dollar in May. The Central Bank of Thailand devoted all its efforts to the whole country and started an anti-encirclement campaign against Soros in the middle and late May, aiming to break Soros's will and make him retreat from difficulties and stop leading the public to attack the Thai baht.
As a first step, the Central Bank of Thailand formed a coalition with Singapore, and used a huge sum of about $12 billion to absorb Taixi. The second step is to follow Mahathir's strategy and tactics in 1994 and use administrative orders to prohibit local banks from lending Taimu to Soros's army; The third step is to raise the interest rate substantially, and the overnight interest rate will rise from about 1% to 1-15%. With a three-pronged approach, cutting-edge weapons and strong counterattack, Taimo rose to a new high of 252 on May 2th.
due to the sudden tightening of money, the interest cost increased greatly, which made Soros's army unprepared and lost $3 million, which was a blow.
However, Soros is still Soros. According to his intuition, Soros thinks that the Bank of Thailand can do nothing more than this. After trying its best, the Thais did not put themselves in a desperate situation, and the losses suffered were relatively minor. From a certain point of view, Soros thinks that he has already won. For southeast Asian countries, the initial victory was just a blip before the disaster, which could not hurt his vitality at all, nor could it save the fate of the southeast Asian financial crisis.
Soros has been working hard for this opportunity for several years, and this time he is prepared and determined to win. A setback of the vanguard troops will not leave it at that, and Soros will have to fight three wars in Southeast Asia.
In June p>1997, Soros sent troops again. He ordered the three armed forces to rally, ordered hedge funds to start selling US Treasury bonds to raise funds, expanded the size of Soros's army, and launched a fierce attack on the Thai baht again in the later period. In a flash, the southeast Asian inclusive market was filled with smoke, and the two sides fought hand-to-hand combat. Thailand was in chaos, and the war situation was complicated. The major exchanges were like boiling hot soup, and people were running and screaming like crazy.
This is a personal war against the country, which seems incredible in form; However, judging from the results, it is even more puzzling.
After a short battle, the Central Bank of Thailand, with only a mere $3 billion in foreign exchange reserves, declared that it was "out of ammunition and food". Faced with the overwhelming Soros army, it was beyond their power to keep the Thai baht at a fixed exchange rate. The Thais had to come up with a last resort, dig up the flesh to mend the sore and implement a floating exchange rate. Unexpectedly, this was expected by Soros, and he also made various preparations for it. Various countermeasures have been implemented, and the fate of the Thai baht has been set on the cross of shame by Soros. The Thai baht continued to decline. On July 24th, the Thai baht fell to 32.5: 1 against the US dollar, a record low. The slaughter of the Thai baht by Soros really made the world miserable, and the Thai people were even more frightened, lamented and blamed the heaven.
However, after the destruction of the city of Thai baht, Soros was not satisfied with this. He concluded that the Thai baht was greatly devalued and other currencies would collapse with it, so he ordered to continue to expand the victory and the whole army swept across Southeast Asia. Soros secretly vowed that the Southeast Asian countries would be searched out this time, and the dream of these ungrateful people trying to replace the West was destroyed.
I heard that Soros's army was making waves, and the other Southeast Asian countries tried their best to fight to the death. The Philippines sold $2.5 billion and Malaysia sold $1 billion to stabilize its currency, but it was difficult to stop the devaluation of peso and ringgit in the face of Soros's powerful offensive. At the same time, the Indonesian rupiah and the Singapore dollar also fluctuated violently. For a time, the Southeast Asian currency market was full of wind and grass. Is this a precursor to a financial crisis or the end of a financial storm? I'm afraid no one dares to jump to conclusions. Perhaps only one person knows the secret, and he is Soros.
Soros adopted a three-dimensional speculative strategy, not just foreign exchange operation. The so-called three-dimensional speculation refers to financial speculation by using the correlation between three or more financial instruments.
In the first half of p>1997, some large funds, represented by Quantum Fund, used "leverage" to continuously squeeze the financial market in Thailand, triggering the financial crisis in Thailand. In the subsequent evolution of the financial crisis in Southeast Asia, these funds used "leverage" on a large scale, which aggravated the degree of the crisis. How did they do it? As Soros himself described, "We use our own money to buy stocks, pay 5% in cash, and borrow the other 95%;" If bonds are used as collateral, we can borrow more money, and we can buy at least $5, worth of long-term bonds with $1,. (Soros waiting for Soros on Soros, Hainan Publishing House, 1997). They used their own capital as collateral, borrowed from banks to buy securities, and then continued to borrow with securities as collateral, which rapidly expanded the debt ratio. Not only that, they also widely speculated on various derivatives with the characteristics of "high leverage", thus further improving the leverage ratio. According to The Economist, Quantum Fund did buy put options in large quantities as early as March 1997, borrowed a large amount of Thai baht in the form of swaps, and sold Thai baht futures and forwards, because it was expected that the counterparty would sell Thai baht spot to protect the value of derivative contracts, and it was easy to create devaluation pressure on Thai baht by others. What is worth mentioning is his practice in Hong Kong, which is a classic example of three-dimensional speculation.
under normal circumstances, due to the existence of arbitrage-free equilibrium relationship between financial markets, with the birth and development of various financial derivatives and their markets, the spot market, forward market, money market, capital market and derivative market of foreign exchange are interlocking, locking up one after another and moving the whole body. A typical example is that in October 1997 and several subsequent times when international speculators attacked Hong Kong's financial market, international speculators first borrowed a large amount of Hong Kong dollars in the money market and sold Hong Kong dollars, forcing the Hong Kong Government to sharply raise the interbank interest rate in the money market; The sharp rise in interbank interest rates in the money market caused the stock market to fall; At the same time, it caused the Hang Seng Stock Index futures to fall sharply in the derivative market. The sharp decline of HSI futures accelerated the decline of the stock market; The decline in stock prices has sharply reduced the confidence of foreign investors in the Hong Kong economy and the Hong Kong dollar, and they have sold Hong Kong stocks in exchange for US dollars, which has put the Hong Kong dollar under a new round of depreciation pressure. The chain reaction of various markets eventually expanded the victory of speculators in an all-round way.
It is expected that an attack on Hong Kong's foreign exchange market will cause a chain reaction, and international speculators will make a three-dimensional layout in various markets. On the one hand, they will increase their bets in various markets, fueling speculation; On the other hand, once the speculation is successful, a full harvest can be achieved, matching the speculative risks with high returns. Soros made a vivid description of this: "If you regard the general portfolio as a flat or two-dimensional thing, as the name suggests, it is easiest to understand this. However, our investment portfolio is more like a building. Based on our share capital, a three-dimensional structure is established, with structure and financing, supported by the pledge value of basic shares. ..... We are willing to invest capital according to three main axes: stock position, interest rate position and foreign exchange position. ..... Different parts reinforce each other, creating this three-dimensional structure composed of risks and profit opportunities. Usually two days-a rising day and a falling day-are enough to inflate our fund at a high speed. " (Soros waiting for Soros on Soros, Hainan Publishing House, 1997). International speculators made full use of this "three-dimensional speculation" strategy when attacking Hong Kong's financial market: first, they borrowed a lot of Hong Kong dollars in the money market; In the stock market, borrow constituent stocks; Accumulate short futures in the stock futures market; Then use spot trading to short Hong Kong dollars in the foreign exchange market and sell Hong Kong dollar forward contracts at the same time; Forcing the hong kong government to raise interest rates to defend the linked exchange rate; In the stock market, the borrowed constituent stocks are thrown out to suppress the futures index. On the whole, based on the close relationship between financial markets, the "three-dimensional layout" strengthens the risk exposure of speculators and greatly increases the power and income of leveraged speculation. Before August, 1998, the rich returns obtained by international speculators by this method undoubtedly encouraged their greed, made them willing to take risks and increased the abnormal fluctuations in Hong Kong's financial market. When international speculators came to Hong Kong again in mid-August 1998 and used the same tactics, their luck was not so good. The Hong Kong government resolutely entered the market to fight against international speculators. This "battle" was thrilling, and the Hong Kong government finally won, defending Hong Kong's wealth and defending Hong Kong's linked exchange rate system. It is said that the China government has used its foreign exchange reserves to support the government. However, the market opened by the government itself, and it is a bit entertaining to go in and play.