October 20, 1997.
The stock market reopened after the weekend—and, as expected, it began with another drop.
The giant market boards were awash in a sea of blue, and financial stocks—especially banks and securities firms—were plunging even harder than other sectors.
It was the fallout from the announcement made just yesterday afternoon: foreign exchange operations of 12 merchant banks had been suspended, and they were issued restructuring orders.
Small groups of individual investors gathered in the trading floor sat in stunned silence, watching the index tumble endlessly with no clear bottom in sight. Most now looked as if they had resigned themselves to despair.
"Ilhan Bank's falling again today…"
A middle-aged man clutching a rolled-up economic newspaper let out a groan. A man in a work jacket replied curtly.
"It's not just Ilhan. Wooyoung, Korea Exchange Bank, even the securities companies—every financial stock is dropping like autumn leaves in the dead of winter."
Hearing that, a woman with a perm began stamping her feet in frustration, her face twisted in anguish.
"It's not even at 2,500 won anymore. If I'd known this would happen, I should've sold Daehung Securities before the weekend!"
As she clutched her chest in regret, the man in the work jacket looked on with growing concern.
"Tch. At this rate, some banks or securities firms might actually go under…"
"That's never happened before," the middle-aged man said gravely, "but with even the chaebols collapsing, there's no way banks will be spared."
The woman, visibly shaken by their conversation, suddenly steeled her expression with resolve.
"I can't just sit here like this."
"What are you planning to do?"
"This is the money I saved up to help my eldest son get married. But if this keeps up, I'll lose everything. I have to sell, even if it means taking a loss!"
The man in the work jacket gave a half-hearted shrug, as if to say it was pointless.
"Come on… In a market like this, who's gonna buy?"
"Still, I have to try something! I can't just sit here and lose everything!"
He couldn't argue with that. He looked like he wanted to say something, then just closed his mouth.
"You've got Daehung Securities too, don't you?"
The middle-aged man asked, and the man in the work jacket let out a heavy sigh.
"I thought the price wouldn't fall any further on Friday, so I even used margin to average down... I never imagined it'd come to this."
Startled by his gruff tone, the middle-aged man looked at him and exclaimed,
"Then what are you doing just sitting here? Shouldn't you cut your losses immediately?"
The man scratched the back of his head, staring hopelessly at the massive market board in front of them.
"Everyone's dumping, and no one's buying. Do you really think I could sell? Even if I did manage to, I wouldn't just lose my principal—I'd be left with nothing but debt."
"So what are you going to do now?"
The man in the work jacket gave a bitter laugh.
"There's only one place left for someone who goes broke from stocks."
"Might as well grab a bottle of soju and head to the Han River, huh."
Given all the grim stories circulating after the market crash, the middle-aged man looked at him with real concern.
"Hey, don't say things like that…"
Just as he opened his mouth to offer some kind of consolation, a commotion broke out near the terminals.
"Whoa! What's this?!"
"Did you see the disclosure from Daehung Securities?!"
"They're doing a tender offer at 4,000 won per share—can you believe it?!"
As these voices reached their ears, the two men turned in confusion. Then, the woman who had gone to the counter earlier came running back, her face flushed with excitement.
"Did you hear the news?"
"What news?"
"Daehung Securities is buying back its shares! At 4,000 won a share!"
At her breathless words, the two men's eyes widened.
The man in the work jacket, who had looked completely crushed just moments ago, grabbed the woman and asked urgently:
"Is that true?!"
"That's what the counter staff just told me. The official disclosure came out a moment ago. Gosh, I nearly sold everything—if I'd been just a bit quicker, I would've regretted it for the rest of my life!"
She let out a sigh of relief, pressing a hand to her chest.
"But why is Daehung suddenly buying back shares? Are you sure the disclosure isn't some kind of mistake?"
The man looked skeptical, but the woman waved her hands adamantly.
"It's not the company—it's the second son of the Daehung Group chairman, apparently. He's the one doing the buying. But who cares who it is? The stock was about to fall below 2,000, and now someone's offering a premium to buy—that's all that matters."
At that moment, the middle-aged man pointed toward the giant market board.
"Looks like it's true. Look at that."
The man in the work jacket whipped his head around and stared.
Just moments ago, Daehung Securities had been falling along with the rest of the financial sector—but now, it was rebounding.
[Daehung Securities 2,950 (+421)]
"See? Told you I wasn't lying,"
the woman said smugly, shrugging her shoulders.
"They're not buying all the shares, just about 5 million. Anyway, it's a limited amount for the next three days, so go register quickly. I just filled out the paperwork at the counter."
"I-I see…"
The man in the work jacket looked toward the counter with a face full of urgency.
"I'd better hurry and sign up too. Ma'am, thank you!"
Then, as if his feet were on fire, he dashed off in a panic.
If Daehung Securities' stock had dropped again today, he would've received a call demanding additional margin—and with no way out, he'd have been checking the temperature of the Han River by now. There was no way he could let this heaven-sent opportunity slip through his fingers.
By now, word had spread like wildfire. The middle-aged man clicked his tongue as he watched the growing crowd, their faces lit with relief, rushing toward the counter.
"If I'd known this was coming, I would've bought Daehung Securities instead of Ilhan Bank... Bad call on my part."
While the overall stock market continued to tumble, shaken by the previous day's shock announcement of the suspension and restructuring orders for twelve merchant banks
Only Daehung Securities, having issued a tender offer disclosure, soared against the tide, hitting the daily upper limit and skyrocketing to 3,900 won per share in a flash.
***
Gwanghwamun Government Complex 1.
Seated in the middle of the sofa, Economic Deputy Prime Minister Choi Jin-woo listened tensely to Vice Minister Shin Seung-gi's report, a cigarette in one hand and a sharply drawn expression on his face.
"...They said that overinvestment in facilities by the chaebol groups—especially in automobiles, semiconductors, and steel—is placing a heavy burden on the economy, and they demanded structural adjustments in these sectors. They also strongly urged that the insolvent commercial banks and merchant banks be consolidated as a priority."
"Hmm."
Choi Jin-woo grimaced and muttered lowly, while Vice Minister Shin continued cautiously.
"Additionally, they insisted on the complete opening of Korean companies, including financial firms, to foreign corporations and investors without restrictions."
Having heard everything, Deputy Prime Minister Choi furrowed his brows sharply.
"Damn it. This is basically telling us to strip down to our underwear and hand everything over."
The Ministry of Finance officials seated around the sofa wore expressions mixed with gloom and anger.
"We argued that these conditions were too harsh, but they are taking a hardline stance: if we don't accept the demands, they won't provide a single won of bailout funds."
"This is ridiculous. They've got us by the throat and expect us to stamp the agreement without a word! It's like a full-scale occupation!"
Deputy Prime Minister Choi's veins bulged as he exploded in anger.
Vice Minister Shin and the other officials were equally furious at the IMF's one-sided actions.
But since the other side held all the leverage, there was no choice but to be dragged along helplessly.
"Damn it."
Exhaling a plume of white cigarette smoke, Deputy Prime Minister Choi said,
"The bailout's preconditions include raising the short-term interest rate from the current 14% to 30%, right?"
"That's correct."
Vice Minister Shin nodded slightly, casting a quick glance at Choi Jin-woo's face.
"At the same time, they demanded the immediate closure of 12 merchant banks and the merger or sale of two insolvent banks within six months."
"On top of that, they want austerity measures and a full opening of the stock and bond markets."
"...Yes."
Smack!
Deputy Prime Minister Choi slammed his palm on the sofa's armrest and shouted fiercely.
"They may all sound reasonable, but if we implement all these at once, the shock will be enormous! Are they here to help us, or to completely destroy the Korean economy?"
Vice Minister Shin flinched briefly but answered with a stern face.
"There's no doubt these demands are excessive, but to get out of the foreign exchange crisis immediately, we'll have to make some concessions."
"I know we're in a desperate situation, but if the very foundation of Korea's economy collapses, how can we promise any recovery after the crisis?"
Choi's angry words left Vice Minister Shin speechless.
Choi crushed his nearly burnt-out cigarette in the ashtray and asked,
"How much foreign exchange reserve do we have left?"
Then Jung Ji-hoon, Director of Financial Policy, immediately answered.
"As of this morning, we have 10.2 billion dollars in reserves."
Upon hearing the figure, Deputy Prime Minister Choi Jin-woo slightly furrowed his brow.
"So we're about to fall below the 10 billion mark."
Vice Minister Shin Seung-gi then spoke with a dark expression.
"This afternoon, a major travel agency, C. France, and a mid-sized cosmetics company declared final bankruptcy after failing to overcome their liquidity crises. The fear of a chain of bankruptcies caused the KOSPI to close at 363.66, hitting a new yearly low."
"Hmm."
"And in the foreign exchange market, the won-dollar exchange rate rose by 43.11 won compared to the previous day, closing at 1,291.37."
After a brief hesitation, Shin continued in a somber voice.
"This is the highest rate since the adoption of the market-average exchange rate system in 1990."
"Ugh…"
Frustrated, Deputy Prime Minister Choi loosened his necktie with one hand and replied.
"If we don't defend the exchange rate, it'll go over 1,300 tomorrow."
Neither Vice Minister Shin nor the other officials could respond; they all remained silent.
"It really feels like we're standing at the edge of a cliff."
Everyone in the room shared the same sentiment.
Deputy Prime Minister Choi rubbed his forehead in distress. After thinking for a moment, he looked at Shin Seung-gi, who was in charge of the negotiations, and said,
"The situation is dire, but we can't just give in to all of their demands. So do whatever it takes to persuade them and ease the conditions as much as possible."
Faced with the difficult order, Vice Minister Shin let out a silent sigh.
Do whatever it takes— he thought bitterly. Just how is that supposed to happen? The path ahead felt completely dark.
But for the sake of the country and its people, he couldn't let the negotiations end like this. Biting his lower lip, he finally responded.
"Yes, I'll do my best."
After a long while of further discussion, the meeting finally ended, and Vice Minister Shin Seung-gi and the other officials stood up from their seats.
Deputy Prime Minister Choi Jin-woo, left alone, remained seated on the sofa. He put a freshly lit cigarette to his lips and sparked it.
Since taking office as the economic deputy prime minister, the only thing that had increased over these past few days of extreme stress was his cigarette consumption.
By now, he had probably smoked through more than two packs just today.
"Hoo..."
Choi Jin-woo inhaled the cigarette smoke deeply and slowly exhaled as he pondered how to handle the negotiations with the IMF delegation.
But since the situation was heavily tilted against them, no clear solution seemed in sight.
Just then, his pager buzzed, and Choi Jin-woo pulled out his cellphone from his pocket.
Seeing the number displayed on the screen, he frowned in curiosity but answered the call.
A familiar voice came from the other end — Seok-won's.
[Are you very busy?]
"Ah, no, I was just taking a short break."
[Hope I'm not bothering you unnecessarily.]
"No, not at all. But what's this sudden call about?"
[If you have time, could we meet briefly this evening?]
Surprised by the sudden request, Choi Jin-woo knit his brows.
"May I know what it's regarding?"
[I thought I might be able to offer some small help with the negotiations against the IMF delegation, so I'm reaching out.]
Hearing that, Choi Jin-woo's eyes widened in surprise.