Soros and the Asian financial crisis; ; 1In February 1997, Boorman, the International Monetary Fund, warned that only two years after the Mexican financial crisis broke out, a large amount of hot money was being injected into emerging markets such as Asia at a record speed, and "irrational enthusiasm" was widely appearing in these markets, which might lead to painful shocks.
However, Boehlmann's voice was not heard, which made Soros finally make up his mind to fight against the strength of the Southeast Asian nations group by himself.
Faced with the prevalence of currency market speculation in various countries, the central banks in Southeast Asia have been hesitant about the rate of market value change, especially worried that the outflow of hot money will be as fast as the inflow into China, which will lead to large exchange rate fluctuations. But at this moment, it is very difficult to turn on this reopened capital faucet. The central banks of Southeast Asian countries have reached the final stage.
Soros who seized the opportunity was out.
But this time, Soros and his men not only appeared cautious, but also selected the Thai baht, which has not become a regional currency since the 1980s. Although interest rates in Indonesia and the Philippines are higher than those in Thailand, Indonesia's exchange rate is often manipulated by Indonesian officials, so it is difficult to speculate. The Philippines also has a lot of control over the foreign exchange market, and it is not convenient to let go of your 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; Apart from 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 minimal risk. On the other hand, Thailand's "false" economic prosperity is the most prosperous, and the depressed real estate market drags down the original financial industry, so the market value of Thai baht is actually the most unstable and easily broken.
The reason why Soros took the too-timid operation is that he took a fancy to the above advantages, that is, the so-called "catch the thief first, then catch the king." After breaking the Taimu fortress, he will be able to completely sweep Southeast Asia. In this way, Soros commanded his men to secretly transfer funds to Southeast Asia, and when the last time was ripe, they landed in Southeast Asia on a large scale and killed those who were still dreaming.
Soros finally quietly declared war on Southeast Asian countries.
1 On March 3, 1997, the Central Bank of Thailand announced that nine domestic finance companies and1housing loan companies had problems of low asset quality and insufficient liquidity. Soros and his men believe that this is a possible increase in Thailand's financial system.
Under the hint of deep-seated problems, they pre-emptively ordered the sale of shares in Thai banks and financial companies, and households made large withdrawals from all financial and securities companies in Thailand. At this time, the western impact fund headed by Soros is waiting for a large number of Southeast Asian currencies to jointly sell 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. In May, the lowest jumped to 1 USD against 26.70 baht. The Central Bank of Thailand devoted all its efforts to the whole country, and launched an anti-encirclement campaign against Soros in the middle and late May, aiming at disintegrating Soros's will, making him retreat from difficulties and stopping leading the people to attack the Thai baht.
As the first step, the Bank of Thailand formed an alliance with Singapore and used a huge sum of about 654.38+0.2 billion US dollars to absorb Thai milling. The second step is to imitate Mahathir's strategy and tactics in 1994 and prohibit local banks from lending Thai wood to Soros's army by administrative order; Step 3: Raise the interest rate substantially, and raise the overnight rate from about 10% to 1500%. With a three-pronged approach, sophisticated weapons and a strong counterattack, on May 20, Taimo rose to a new high of 2,520.
Due to the sudden tightening of monetary policy and the sharp increase in interest costs, Soros's army was caught off guard and lost $300 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 that. After hard work, the Thais did not put themselves in a desperate situation and suffered relatively little losses. In a way, Soros thinks he has won. For southeast Asian countries, the initial victory was only a flash in the pan 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 worked hard for this opportunity for several years, and this time he is prepared and determined to win. The first defeat of the vanguard troops did not stop there, and Soros had to fight three wars in Southeast Asia.
1June, 997, Soros sent troops again. He ordered the three armed forces to regroup, ordered hedge funds to start selling US Treasury bonds to raise funds, expanded Soros's army, and later launched another fierce attack on the Thai baht. In a flash, the inclusive market in Southeast Asia was filled with smoke, and the two sides started hand-to-hand combat. Thailand is in chaos and the war situation is complicated. The major exchanges are like boiling hot soup, and people are running and screaming wildly.
This is a personal war against the country, which looks incredible in form; However, judging from the results, it is even more puzzling.
After a short battle, the Central Bank of Thailand, with a foreign exchange reserve of only $30 billion, announced that it had "run out of ammunition and food". Faced with the overwhelming Soros army, they could not keep the Thai baht at a fixed exchange rate. Thais have to come up with a last resort, dig up the meat to mend the sore and implement a floating exchange rate. Unexpectedly, this is what Soros expected, 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 fall. On July 24th, the Thai baht fell to 32.5: 1 against the US dollar, a record low. Soros's slaughter of the Thai baht really made the world miserable, and the Thai people were even more frightened, dumbfounded and complaining.
However, after the Thai baht broke the city, Soros was not satisfied with it. He concluded that the Thai baht would depreciate sharply and other currencies would collapse, so he ordered to continue to expand the results and the whole army swept Southeast Asia. Soros secretly vowed that the Southeast Asian countries would be searched out this time, and these ungrateful people's dreams of trying to replace the West were dashed.
I heard that Soros's army made waves and couldn't come. Other Southeast Asian countries tried their best to resist to death. The Philippines sold $2.5 billion, and Malaysia sold 1 billion to stabilize the local currency. However, in the face of Soros's powerful offensive, it is difficult to stop the devaluation of the peso and the ringgit. At the same time, the Indonesian rupiah and the Singapore dollar also fluctuated violently. For a time, the southeast Asian currency market was jittery and nervous. Is this a precursor to the financial crisis or the end of the 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 operations. The so-called three-dimensional speculation refers to financial speculation by using the correlation between three or more financial instruments.
During the first half of 1997, some large funds, represented by Quantum Fund, used "leverage" to continuously squeeze the financial market in Thailand, which triggered the financial crisis in Thailand. In the subsequent evolution of the Southeast Asian financial crisis, 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 remaining 95%;" If bonds are used as collateral, we can borrow more money, and we can buy long-term bonds worth at least $50,000 with 1000. (Soros et al. Soros on Soros, Hainan Publishing House, 1997). They used their own funds as collateral, borrowed money from banks to buy securities, and then used securities as collateral to continue borrowing, which quickly expanded the debt ratio. Not only that, they also widely speculate on various derivatives with "high leverage" characteristics, thus further increasing the leverage ratio. According to The Economist, Quantum Fund did buy a large number of put options as early as1March 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 counterparties would sell Thai baht spot to hedge the value of derivative contracts, and it was easy to be devalued by others. It is worth mentioning that his practice in Hong Kong is a classic example of three-dimensional hype.
Under normal circumstances, due to the existence of non-arbitrage 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 one after another, which will affect the whole body. Typical examples, such as June 1997, June 10, and several subsequent attacks by international speculators on Hong Kong's financial market, first of all, international speculators borrowed a lot of Hong Kong dollars in the money market and sold Hong Kong dollars, forcing the Hong Kong government to substantially raise the interbank interest rate in the money market; The sharp rise in interbank interest rates in the money market led to a decline in the stock market; At the same time, the Hang Seng stock index futures in the derivative market fell sharply. The plunge 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, putting the Hong Kong dollar under a new round of depreciation pressure. The chain reaction of various markets finally expanded the victory of speculators in an all-round way.
It is expected that the 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 and encourage speculation; On the other hand, once the speculation is successful, you can get a full harvest and match the speculative risk with the high income. Soros made a vivid description of this: "If you regard the general portfolio as a flat or two-dimensional thing, as the name implies, it is the easiest to understand. However, our portfolio is more like a building. Based on our share capital, establish a three-dimensional structure 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 make our fund expand at a high speed. " (Soros et al. 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 the Hong Kong dollar in the foreign exchange market and sell the Hong Kong dollar forward contract 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 motivation and income of leveraged speculation. 1before August, 1998, the rich returns obtained by international speculators in this way 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 of 1998 and used the same tactics, their luck was not so good. The Hong Kong government decisively entered the market and cracked down on international speculators. This "battle" was soul-stirring, and finally the Hong Kong government won, defending Hong Kong's wealth and the linked exchange rate system. China government has used foreign exchange reserves to support the government. However, the market opened by the government itself is a bit entertaining to go in and play. With the strong support of the central government, the Hong Kong government blew the drum of victory to retreat to the camp and fought a beautiful financial defense war!