Chapter 500: Profit of 470 Million and the Eve of the Decisive Battle
After work the next day, Wang Danrong came in and reported to Li Xiaofan that the Thai foreign exchange market had recently seen a wave of selling of Thai baht and buying US dollars. Some people spread rumors in the media and on the Internet that the International Monetary Fund had requested the devaluation of the Thai baht...
After the New Year, Li Xiaofan asked Wang Danrong and his investment team to pay close attention to Thailand's financial market dynamics every day, and report any disturbances to him in a timely manner.
It's only the end of February 1997, so Soros took action so early?
Li Xiaofan asked with doubt: "Danrong, how about the Thai baht these days? Has it depreciated?"
Wang Danrong replied: "Director Li, the Bank of Thailand has taken action in the past few days. News from our Bangkok branch said that in order to stabilize the Thai baht exchange rate, the Bank of Thailand had to intervene, selling US dollars and buying Thai baht. To maintain the balance between supply and demand of US dollars and Thai baht in the foreign exchange market, it is said that the Bank of Thailand consumed US$2 billion in foreign exchange reserves to stabilize the situation.”
“What’s Thailand’s recent economic data like?”
"Director Li, it's not very good. Last year in 1996, Thailand's current account deficit accounted for 8.1% of GDP. An internal report said that nearly 30% of their foreign loans and 80% of their foreign direct investment were invested in the real estate and securities markets. Currently, there are more than 85 vacant residences in major cities such as Bangkok, with a vacancy rate of 20%. The bad debts of several major banks in Thailand exceed US$15 billion. These bad debts are mainly caused by investment properties..."
What Li Xiaofan didn't know was that in February 1997, Soros's Quantum Fund was launching a tentative attack on the Thai baht. Before launching a financial war, they used the media and other public opinion tools to carry out vigorous publicity as a coordination. They spread rumors in the media and on the Internet that the International Monetary Fund had requested the Thai baht to devalue, and then the Quantum Fund sold the Thai baht it had previously borrowed from the Bank of Thailand and then bought US dollars.
At the same time as the public opinion war was going on, Soros' Quantum Fund sold US$100 million worth of Thai baht in a short period of time, triggering international investors to follow suit. As a result, there was a wave of selling of Thai baht and snapping up US dollars in the Thai foreign exchange market.
In order to stabilize the Thai baht exchange rate, the Bank of Thailand had to intervene and consumed US$2 billion in foreign exchange reserves to stabilize the situation.
For Soros's Quantum Fund, due to the intervention of the Bank of Thailand, the sniper did not depreciate the Thai baht, they were unable to profit from it, and they also lost US$5 million.
However, from this exploratory sniper, Soros found that the Thai authorities were slow to respond. They did not notice it at first and their ability to adjust the foreign exchange market was insufficient afterwards. This allowed Soros to see the opponent's weakness and decided to launch another attack on the Thai baht. sniper.
In Li Xiaofan’s memory, the Asian financial crisis should have started with the collapse of Thailand’s baht in June and July this year.
There are still about four months left, and the layout can almost be carried out in advance.
Immediately, Li Xiaofan asked Wang Danrong to call the financial director Zhou Xiaoqing, and ordered them to start an operation: use the company's equity holdings in Yahoo and Pacific Online Bookstore as pledges, borrow US dollars from local banks such as Citigroup in the United States, and use the loaned US dollars to Put it in the account of Yifan Investment Company in the United States, and choose the opportunity to enter Thailand's financial market...
Zhou Xiaoqing said worriedly: "Director Li, Thailand's financial market is so turbulent, why do we want to get into troubled waters?"
"If the water is clear, there will be no fish. If the water is muddy, it's easy to fish! We have a chance here..." Li Xiaofan said with a smile.
At the same time that Li Xiaofan registered an investment company in Thailand and opened securities and foreign exchange trading accounts, the domestic stock market was in full swing.
On March 11, the Shenzhen Component Index surpassed the high of 3,900 in one fell swoop.
On April 21, the Shenzhen Component Index reached its highest point of 4923 points, and the Shanghai Stock Exchange Index reached its highest point of 1350 points.
On the same day, the Shenzhen Development Bank bought by Li Xiaofan closed the daily limit at 31.82 yuan, and Sichuan Changhong also soared to 45 yuan.
Yang Feiyan was stunned when she saw the stock market that day. Two months ago, the average profit margin of the stock accounts she helped Li Xiaofan buy was 60%. The market value of the 230 million yuan invested had reached 370 million yuan, and the book profit had reached 140 million!
On April 24, the mainland management decided to "carry out the activities of the Year of Risk Prevention in the Securities and Futures Markets". However, the stock market still ignored the situation that day and went up strongly. The Shenzhen Component Index broke through 5,000 points in one fell swoop. By April 30, the Shenzhen Component Index reached as high as 5,211 points.
On May 7, the Shenzhen Component Index soared to 6,000 points, and Shenzhen Development Bank closed at its daily limit of 48.91 yuan. On May 8, the Shanghai Stock Exchange Index finally reached its highest point of 1504.26 points!
This all-time high of 1,500 points was only seen from February 15 to February 22, 1993. The 1,500 points, which had been missing for more than 4 years, made investors excited, and the popularity became even more intense at this time. On the same day, the Shenzhen Component Index rose to 6039 points.
But just when people were cheering, excited and even a little fanatical, the management tightened control measures. On Saturday, May 10, management announced that the stamp tax rate for stock transfers would be increased from 3% to 5%.
On May 12, the Shenzhen and Shanghai stock markets rose again, regarding the negative as positive, and the main force made a last-ditch effort. On that day, the Shenzhen Component Index reached the highest point of the year at 6103.63 points.
The Shenzhen Composite Index reached a year-high of 520 points on May 13, setting a new record for the stock index. The Shanghai Composite Index reached its highest point of the year at 1510.18 points.
Shenzhen Development Bank reached its highest price of the year at 49 yuan that day, and Sichuan Changhong reached its highest price of 62 yuan that day.
On May 12, Li Xiaofan emptied all the stocks in all mainland stock market accounts. The average selling price of Shenzhen Development Bank was 48 yuan, and the average selling price of Sichuan Changhong was 60 yuan.
The funds in more than 50 stock fund accounts controlled by him reached an astonishing 520 million!
And the funds invested by Li Xiaofan last year were about 50 million yuan, which increased by an astonishing ten times, and made a profit of 470 million yuan!
On May 12, the day when Li Xiaofan emptied his A-share stocks, Soros issued a second order to attack the Thai baht to the Quantum Fund he controlled.
The Quantum Fund borrowed a large amount of Thai baht from Thai commercial banks, and sold Thai baht and bought US dollars in the spot foreign exchange market and the forward foreign exchange market at the same time. At the same time, his alliance and other international speculative institutions adopted the same routine to operate, and the Thai foreign exchange market was temporarily overwhelmed by dark clouds.
Under the attack of Quantum Fund and international speculators, on May 14, the Thai baht exchange rate fell to 26.21 baht per US dollar, the lowest level in 11 years, which forced the Thai authorities to intervene again.
On May 15, after urgent consultations, the Thai high-level officials decided to take four measures to fight back against international speculators to maintain the stability of the Thai baht exchange rate.
The measures taken by Thailand include: 1. Jointly with the financial management departments of Singapore and Hong Kong to intervene in the foreign exchange market to improve defense capabilities; 2. Prohibit Thai commercial banks from lending Thai baht to foreign speculators to cut off their sources of funds; 3. Seek help from the Bank of Japan to supplement US dollar funds; 4. Raise the overnight lending rate of Thai baht funds to 25% to increase the cost of speculators' funds.
The Monetary Authority of Singapore and Hong Kong responded quickly and bought Thai baht with US dollars in the foreign exchange market. With the efforts of the Thai government and the assistance of monetary authorities of other countries and regions, the Thai baht exchange rate rebounded to 25.33 baht per US dollar. This wave of combined punches from Thailand caught international speculators off guard. In this round of competition, the Thai baht exchange rate was pulled back again, which made the Quantum Fund unprofitable and lost nearly $10 million in transaction costs and interest.
Soros and his team did not expect that the Thai authorities would change the rules of the game and cut off their access to Thai baht, which caught them off guard.
When Wang Danrong reported to Li Xiaofan that in the recent Thai financial market, the Thai government, in conjunction with several neighboring countries and regions, successfully blocked the attacks of foreign institutions such as Soros's Quantum Fund and achieved a staged victory, Li Xiaofan looked at the calendar on the desk and said to Wang Danrong:
"Danrong, these are just the prelude, and the real decisive battle is about to begin!"