Nomura Securities Headquarters, Nihonbashi, Chuo Ward, Tokyo, Japan.
Executive Director Usami, wearing a striped tie, sat at his desk, staring intently at the Indonesian stock market chart on his monitor.
[IDX: 615.20 (▼10.17)]
The Indonesian stock index, which had soared past 700 points and was steadily climbing, had collapsed under the weight of the ongoing currency crisis sweeping through Southeast Asia. Now, even the 600-point mark was in danger.
"Whew… At this rate, it might drop below 450."
If that happened, another option clause would be triggered, and they'd have to pay an additional $1 billion to the Eldorado Fund — the very thought made him dizzy.
Frustrated, Director Usami loosened his tie with a rough tug and snubbed out a nearly burnt-down cigarette in the overflowing ashtray.
The pile of cigarette butts alone said everything about his current state of mind.
Just as he lit a fresh one, there was a knock and Nakamura, the head of the Derivatives Division, suddenly burst into the office.
His face flushed, Nakamura rushed to Usami's desk and stood in front of him.
"Sir! Did you hear the news?"
Already irritated by the plunging Indonesian market, Usami frowned and scolded him.
"What's with all the fuss?"
Normally, that sharp tone would have made Nakamura flinch, but today, he seemed unusually animated.
"The Indonesian central bank just announced they're expanding the exchange rate band from 8% to 12%!"
Caught off guard by the unexpected good news, Usami shot to his feet and asked urgently:
"They're loosening the exchange rate band? Is that true?"
"Yes, sir. As soon as the announcement came out, the rupiah depreciated from 2.43 to 2.61 against the dollar."
Usami slammed his palm on the desk.
"They preemptively gave up the fixed exchange rate to neutralize any speculative attack. That's a smart move!"
"Exactly. Now that there's not much profit to be made from attacking the rupiah, hedge funds might just leave Indonesia alone."
Usami nodded firmly.
"Exactly. It's become a gireuk — not worth the effort, but too much trouble to keep. That's what it's become."
(Gireuk [鷄肋]: Literally "chicken ribs," a metaphor for something of little value that's still hard to throw away.)
"Perfect analogy, sir."
The anxiety had completely disappeared from Usami's face. Rejuvenated, he looked at Nakamura.
"So, the stock market might dip a little more from the shock of the rupiah's depreciation, but it won't fall below 450, right?"
"We won't be able to avoid some decline due to foreign investors fleeing to avoid currency losses, but I don't believe it'll drop that far."
"Good. No — it mustn't."
They had already lost $1 billion from the Thai SET index crash. If they lost another massive amount now, the situation would become truly unrecoverable.
Usami stubbed out his half-smoked cigarette and let out a deep sigh.
"Just a moment ago, I was in despair… I guess there really is always a way out."
"Exactly. Those Eldorado bastards were acting all high and mighty, demanding ridiculous penalties — look at them now."
Now that he looked closely, Nakamura's face appeared noticeably gaunt — the stress clearly having taken a toll.
Thinking of all the sleepless nights they'd endured, Usami added:
"Not paying the penalty and canceling the contract might have actually turned out to be a blessing in disguise."
"Absolutely. Who would've thought the situation would flip like this in an instant?"
The two men exchanged smiles, their faces finally brightening.
When Director Usami looked down at the monitor again, still standing, he saw that the market remained weak — the expanded exchange rate band wasn't exactly a favorable development for the stock market.
However, he felt a sense of relief from the optimistic belief that, unlike in Thailand, the stock market wouldn't collapse entirely from a fierce battle against currency speculators.
Now completely at ease, Director Usami gave a calm order.
"If Indonesia stabilizes and the Eldorado people get nervous and try to contact us first, don't take their call."
"Understood. We've already taken losses — we can't let them cancel the contract. We need to drag it out until maturity and recover as much as we can."
"You're absolutely right."
Usami sat back down and muttered to himself,
"If Indonesia can fend off the speculators like this, other countries will likely follow suit. Then this currency crisis that's been destabilizing Southeast Asia might finally start to settle down."
***
Three days later, on Monday.
Seok-won sat with John Porter, the branch manager who had flown in urgently from Japan, on the couch in the CEO's office at Daheung Venture Capital.
"I heard the Indonesian stock market dropped below 600 but is now rebounding?"
Sitting in the middle of the couch with one leg crossed, Seok-won posed the question. Porter, seated to his left, responded immediately.
"Yes. At first, the market continued to decline due to foreign capital fleeing in fear of currency exchange losses after the rupiah's devaluation. But once the Indonesian central bank drastically expanded the exchange rate band, the mood in the market shifted toward buying."
"Investors are jumping in now, thinking this is the bottom."
"That seems to be the case."
After glancing at Seok-won to gauge his mood, Porter continued:
"Unlike other Southeast Asian countries, Indonesia has consistently maintained a trade surplus. Inflation is stable at around 5%, and more importantly, interest rates are over 10 points higher than in the U.S. Because of that, many believe that once the exchange rate stabilizes, the country will quickly return to high growth."
"Economic growth and stock market gains go hand in hand. So, people are buying cheap now while prices are still low, hoping to make a profit."
"On top of that, a Saturday editorial in the Wall Street Journal seems to have fueled even more buying interest among investors."
Leaning back into the plush couch and resting his chin on his hand, Seok-won replied:
"You mean the editorial predicting that Indonesia will become the first Southeast Asian country to successfully fend off the currency speculators?"
"That's right."
The Wall Street Journal, along with the Financial Times of the UK, was considered one of the two major pillars of economic journalism, boasting global prestige and influence in the financial world.
With such a respected outlet publishing an editorial favorable toward Indonesia, it was only natural that the news acted as a bullish factor for the stock market.
"This makes it harder for hedge funds to go after the Indonesian rupiah, doesn't it?"
When Branch Manager Porter cautiously voiced his thoughts, Seok-won shook his head.
"I see it differently."
"...?"
"On the contrary, hedge funds — especially Quantum Fund — will probably push even harder to break the rupiah."
Seeing Porter's puzzled expression, Seok-won elaborated,
"If, just like the Wall Street Journal editorial suggests, Indonesia manages to escape the hedge funds' assault, other countries might follow the same playbook."
"Right, since there would now be a successful precedent."
"Which is exactly why they have no choice but to attack Indonesia — even if the profit potential isn't as high."
Finally understanding what he meant, Porter let out a quiet gasp.
"You're saying hedge funds must bring Indonesia to its knees if they want to maintain control and keep destabilizing Southeast Asia."
"Exactly. They've been feasting sweetly off Thailand, the Philippines, and Malaysia in turn — they won't want the party to end so soon, right?"
"Well, I know I wouldn't want to leave just yet either."
Porter nodded in agreement, but then his expression turned serious again.
"But considering Indonesia took the initiative to widen the exchange rate band, it seems they've put up a pretty solid guard. It won't be an easy fight."
Even if hedge funds defied the Wall Street Journal and expert predictions to launch an assault on the rupiah, it would be meaningless for the Eldorado Fund's Japan branch unless the Indonesian stock market dipped below 450 points — the condition that would trigger the option clause.
Porter expressed his concern, but Seok-won replied with a calm and confident tone.
"Contrary to the expectation that they'll hold strong, they might crumble more easily than you think."
"What do you mean by that?"
Porter furrowed his brows, clearly not understanding.
Seok-won picked up his teacup, took a sip of coffee, and set it down before calmly explaining.
"You already know that, like many Southeast Asian countries, Indonesia's economy and finance have long been dominated and controlled by Chinese Indonesians, right?"
"Of course."
"These people are extremely sensitive when it comes to money. If they believe the devaluation of the rupiah will shrink their wealth, do you think they'll just sit back and do nothing?"
Porter realized he had overlooked that aspect and felt a twinge of regret.
But he quickly started analyzing again, spotting a potential flaw in the logic. Leaning forward, he offered a rebuttal.
"But isn't there a sort of symbiotic relationship between the ruling regime — which has held power for over 30 years — and the Chinese-Indonesian capital? I doubt they'd betray each other."
"That's how it's been up until now."
Seok-won smiled faintly, his expression laced with implication.
"But stagnant water always rots."
"...!"
"Public dissatisfaction has been growing due to over 30 years of corrupt, long-term rule, and conflicts between various indigenous tribes are also intensifying."
Indeed, just a few months ago, an armed uprising by native tribes had forced the Indonesian government to launch a military crackdown, illustrating the increasingly unstable domestic situation.
"More importantly, the president, who has ruled with an iron fist for years, is reportedly in poor health. If there are signs that the regime might falter, wouldn't people want to move their assets to a safer place first?"
At that, Branch Manager Porter swallowed dryly.
"Is it true that there are health issues with the president?"
"Yes. Last year, there was quite a stir after reports surfaced that the Indonesian president had been hospitalized for several days due to symptoms of heart swelling and liver shrinkage, and even went to Germany for treatment."
"..."
"And in April of that same year, his longtime companion and political partner — his wife — suddenly passed away due to a chronic illness. When someone already in poor health loses a close loved one, the physical and emotional toll is enormous."
Porter organized his thoughts briefly before speaking again.
"As you said, with such internal instability, people will likely think it's better to take cover until the storm passes."
"If Chinese-Indonesian capital pulls out, the rupiah will collapse — and the stock market will go down with it."
"Then the second option clause will be triggered as well, right?"
Instead of answering, Seok-won smiled broadly.
Just then, a phone rang. Seok-won turned and picked up the multiline phone placed on the side table.
It was Choi Ho-geun, and his voice was unusually excited.
[Hedge funds are dumping massive amounts of rupiah in the foreign exchange market!]
Seok-won's eyes sharpened as he asked,
"How large is the sell-off?"
[It's passed 300 million—no, over 400 million dollars already, and the selling is still accelerating rapidly.]
"Got it. Keep monitoring the situation, and report any changes immediately."
[Understood.]
Ending the call swiftly, Seok-won set the receiver down and turned to Porter, the corner of his mouth lifting into a smirk.
"Looks like other hedge funds have already started moving."