Quantum Fund Headquarters, 7th Avenue, Manhattan, New York.
In the spacious office, George Soros sat in the center of a large sofa, flanked by Rodney, the CIO, and Ian, the Chief Manager. The three were engaged in conversation.
"I thought they'd focus all their energy on defending the currency, but now they're propping up the stock market too. Looks like they underestimated us," George Soros's voice was low and steady.
Rodney, glancing cautiously at him, responded, "On the contrary, they're probably coming out strong from the start because they're afraid."
"I think you're right," Ian, the Chief Manager, agreed. "Unlike the countries we've faced so far, Hong Kong is financially savvy and understands the nature of hedge funds. They've probably realized that if they start losing control and give up the initiative, it'll be difficult to manage."
George Soros, having long respected Hong Kong's strength as Asia's trade and financial hub, gave a slight nod in agreement. He then took a Cuban cigar from his hand and lit the cut end with a Zippo lighter, inhaling deeply before slowly exhaling.
"How much has Hong Kong spent on defending the currency so far?" he asked.
Ian, the Chief Manager, responded without hesitation, "They've spent over 5.1 billion dollars on currency defense and an estimated 1.6 billion dollars on stock purchases."
"That adds up to just shy of 7 billion dollars," George Soros said, tapping the armrest of the sofa. "They still have about 80 billion dollars in foreign reserves, but if they keep spending like this, they won't last three months."
Rodney leaned forward, adding, "At this rate, with their reserves running out quickly, it won't be long before they're in real trouble."
George Soros, holding the thick cigar between his fingers, tapped the armrest again. "The hedge funds, smelling money, are going to keep attacking and selling off stocks. Even if they buy stocks to prop up the Hang Seng Index, they'll burn through their reserves much faster."
"That's why the Hong Kong authorities aren't just sitting back. They're going in strong from the start, trying to get us to fall out early," Rodney said.
"They know there's no point in dragging this out," George Soros replied, crossing his legs. He turned his head toward Ian and asked, "What's the mood in Beijing?"
"They're watching closely, like a turtle hidden in its hard shell, observing the currency crises sweeping across Asia," Ian replied.
"Is there any sign they might intervene, like Hong Kong is hoping?" George Soros pressed.
"Not yet," Ian responded. "In fact, they've drastically reduced the amount of foreign currency individuals and businesses can take out of the country. They're extremely wary of dollars leaving China."
Rodney interjected, "As we predicted, the likelihood of China's intervention seems low."
George Soros nodded slightly in agreement. "But if this drags on, we could face an unexpected variable."
His eyes gleamed with sharp intensity as he continued, "Fortunately, the Hong Kong government is not only holding strong defenses but also responding aggressively. We'll focus all our strength and aim to finish this quickly."
Rodney added, "Then we'll increase the scale of our Hong Kong dollar sales in the spot and futures markets."
"Do it," George Soros ordered.
After giving the task, he put the cigar back in his mouth. "If they don't back down and instead push harder, causing their foreign reserves to drain even faster, Hong Kong will regret coming at us so recklessly."
***
The Next Day
Bruno Kal, the founder and trader of the small hedge fund Goliath, and David Iverson were sweeping through Asian countries like a swarm of hungry locusts, earning profits far beyond their goals for the year. They were working alongside other hedge funds from Wall Street.
Most of their trading was happening across the Pacific in Asia, so their days and nights had long been turned upside down. Yet, the two of them wore bright expressions as they went about their work.
Kal, having skipped shaving in his obsessive focus, had grown a wild beard and now looked scruffy. With a toothbrush in his mouth, he shuffled over to Iverson's desk.
"Did you check the Hang Seng Index?" Kal asked.
Iverson, who was sitting at his desk wearing a Columbia University football team t-shirt, made a disgusted face at the sight of Kal.
"Go finish brushing your teeth first, okay?"
"I'm doing it," Kal mumbled, his voice muffled by the toothbrush.
"Damn, that's gross."
Trying not to let toothpaste foam spill, Iverson subtly pulled his chair back and reached for his coffee mug.
"The Hang Seng dropped below 15,000 and then couldn't get any higher. It's been struggling," he said.
Kal shrugged lazily as he moved the toothbrush around, not putting much effort into it.
"With the exchange rate unstable and short-term interest rates up by 1.5%, investors are selling risky assets like stocks and either moving their money to savings or just pulling out of Hong Kong entirely."
Iverson sipped his now-cold coffee, his expression calm.
"Seems like, contrary to the Hong Kong government's intentions, investors are seeing their stock market intervention as an opportunity to sell off," he added.
Kal barely moved the toothbrush a few times, then shrugged his shoulders.
"If the risks aren't fully resolved, I'd sell too if I had a buyer, then just sit back and watch the situation unfold."
"Yeah, I guess so," Iverson agreed, nodding in understanding.
"By the way, the El Dorado Fund still isn't involved in attacking the Hong Kong dollar, right?" Iverson asked.
"Right. They've clearly bet on a short position by selling Hang Seng futures, but they're not touching the Hong Kong dollar, which is suspicious."
Iverson frowned. Although they didn't know the exact returns, they suspected that the El Dorado Fund had made the biggest profits so far in the Asian currency crisis by timing the market perfectly.
In particular, the El Dorado Fund had made impressive moves during the Peso bet, and since Kal and Iverson had also made some decent money following their lead, they were now even more curious about the fund's activities.
"Do you think they're planning to get involved if China steps in?" Iverson asked.
Kal mumbled to himself, and Iverson put his coffee mug down on the desk before responding.
"If that were the case, they would've gone long, not short, in the futures market."
"True."
No matter how much they speculated, they couldn't figure out what the El Dorado Fund was up to, and it was frustrating.
Just then, a beep sounded, and the two of them instinctively turned their eyes to the monitor.
Kal's eyes widened as he saw a massive sell-off of 3 billion Hong Kong dollars all at once in the Tokyo foreign exchange market. He shouted in disbelief.
"What is this?!"
Meanwhile, Iverson quickly sat up and began typing on the keyboard.
"The sell orders are increasing."
"Let me take a look."
Kal removed the toothbrush from his mouth and held it in his hand as he leaned in closer to the monitor.
"This looks like it's all coming from one source. Whoever is dumping this much must be either the El Dorado Fund or the Quantum Fund," Kal muttered with a serious expression.
"They're really pushing hard. Don't you think we should jump in too?" Kal asked.
Iverson hesitated for a moment before asking.
"How much balance do we have left?"
"About 50 million dollars."
"Then let's go in for half of that."
"Sounds good."
Kal nodded in agreement immediately.
Iverson quickly typed on the keyboard and sold an additional 25 million dollars' worth of Hong Kong dollars in the futures market.
As George Soros pushed for a larger sell-off of Hong Kong dollars, the Goliath Fund, along with other hedge funds, followed suit. That day alone, a staggering 30 billion Hong Kong dollars were sold off.
***
The Hong Kong government had declared a direct confrontation, and hedge funds led by the Quantum Fund launched a massive offensive by dumping huge amounts of Hong Kong dollars. Meanwhile, the office of the Daheung Venture Capital's Fund Management Department was bustling with activity.
Beep! Beep!
"Sell 350 lots at 13,500! And set another 200 lots to sell at 13,450!"
"There was a buy order at 14,000 just a moment ago! Oh, come on!"
Amid the team members shouting into their phones, Choi Ho-geun sat with his arms crossed, staring intensely at the trading screen displaying the Hong Kong and Tokyo futures markets.
Despite the Hong Kong government's strong response, China showed no significant action. Meanwhile, hedge funds aggressively attacked the Hong Kong dollar, causing buying pressure to quickly subside.
Choi Ho-geun, unable to shave, rubbed his stubbled chin with one hand as he muttered to himself.
"It looks like it's time to make the final move and solidify the position."
Having made his decision, Choi Ho-geun stood up and shouted to the team, who were frantically executing trades.
"Sell as much as possible at 12,000!"
The team members, initially surprised, quickly adjusted their quotes and placed new sell orders.
"250 lots at 12,000!"
"400 lots at 12,000. Yes, that's correct!"
As the significantly lowered orders went through, the buying pressure began to return, and the trades started to be executed.
Seeing his strategy working, Choi Ho-geun smiled slightly, when suddenly, a voice came from behind him.
"Is the trading going well?"
Turning around, Choi Ho-geun saw Seok-won, wearing a summer suit, entering the office with his assistant, Han Ji-sung.
"Oh! I didn't realize you had arrived."
Choi Ho-geun quickly bowed in greeting to Seok-won.
"When you're focused on trading, things like that happen," Seok-won replied with a smile, then casually glanced at the large market board on the opposite wall.
"It seems like the Hong Kong government's market intervention has lost its effect. How's the atmosphere now?"
"Indeed. The buying pressure, which had briefly risen due to the anticipation, is rapidly fading. So, I'm selling as much as possible at 12,000 before the trading completely dies down."
Seok-won, with his hands in his pants pockets, continued to study the market board and nodded in approval.
"Given that the Quantum Fund is pushing harder against the Hong Kong government to avoid a prolonged battle, it's likely the Hang Seng Index will fall again. Good call."
"Thank you," Choi Ho-geun said, pleased by the praise, and bowed his head.
At that moment, Yoo Seok-hyun, holding a receiver in one hand, suddenly stood up in alarm and turned toward them, delivering urgent news.
"The Hong Kong government has raised the short-term interest rates back to 10%!"
Suddenly, the actions of the team members in the office came to an abrupt halt.
Everyone stared wide-eyed at Yoo Seok-hyun, and Choi Ho-geun asked, his voice tinged with disbelief.
"Is that really true?"
"Yes, it just came through on the Bloomberg terminal as breaking news. And they've also raised the margin requirement for futures trading to 150%."
As soon as Choi Ho-geun rushed to check the Bloomberg terminal installed at one side of his desk, the breaking news indeed appeared on the screen.
Looking over at the futures trading window on his monitor, he saw that, as if by magic, all the buy orders had vanished following the news of the interest rate hike and the margin increase.
If he had been even a little late, he would have missed the final opportunity to sell futures.
Letting out a sigh of relief without realizing it, Seok-won lightly patted Choi Ho-geun on the shoulder and said,
"You nailed the timing perfectly. Well done."