On November 15, 1997, in a villa in Repulse Bay, Hong Kong, Liu Si wore beach pants, sunglasses, and a straw hat on his head, lying comfortably on a beach chair by the villa pool.

"What a treat!" At present, there are too many industries under the Liu family, and there are not nearly 1,000 subordinate holding and shareholding enterprises, but at least hundreds, and most of them are still sunrise industries.

However, as soon as there are many industries, management is not good, especially the Liu family has too few talents. At present, the domestic acquired enterprises are hired as long as there is no stain on the ability of those domestic managers, so it seems that many domestic industrial management is in place.

But in fact, this is not the case, one is that many managers who are now in the position of general manager have not investigated in detail, and the audit speed of the accounting team is still very slow, just a few days ago I listened to the report, and only more than 10 accounts have been cleared. Liu Si pays attention to such as Huangshan Electronics, Agang, Fushun Iron and Steel...... The financial audits of these large companies are still very early.

In order to acquire these companies, Liu Si traveled all over the country just to sign and seal, and even such a simple thing, it took him a month and a half to complete. Often, the state-owned enterprise has just signed and sealed to confirm the acquisition, and before it has time to eat, it has to go to the next enterprise to repeat this step.

Most companies have already drawn up the acquisition agreement before Liu Si arrived, but the funds for the acquisition were in the hands of the second generation early, and what Liu Si needed to do was to go through the process, sign and seal, and the monotonous things would not be repeated.

When I returned to Hong Kong, I wanted to take a good rest, and second, Liu Si actually had no money in his hands now, so it was useless to stay in the mainland. Therefore, he is actually waiting for money to stay in Hong Kong now, he is waiting for the unwinding of the Hang Seng Index futures of the Shun Tak Fund, and the unwinding of the December forward contracts on the currencies of the ringgit, Philippine peso, Thai baht and Indonesian rupiah on the Xinjiapo side.

After the Shun Tak Fund Hang Seng Index futures contract, the December forward contract of the four currencies of the ringgit, Philippine peso, Thai baht and Indonesian rupiah, both financial products are closed, Liu Si's cash income this time alone will be more than 60 billion US dollars.

In fact, the real low point of the Hang Seng Index and the ringgit, Philippine peso, Thai baht, and Indonesian rupiah currency forward contracts was in January, but when the short seller was at the beginning, there was no January '98 forward contract, so the current Liu Si holds all the December forward contracts.

It is also because the Hang Seng Index and the ringgit, Philippine peso, Thai baht, and Indonesian rupiah currency forward contracts are still in a downward trend, so it is much easier than expected to clear the Hang Seng Index futures contracts, ringgit, Philippine peso, Thai baht, and Indonesian rupiah currency forward contracts.

For the Hang Seng Index futures contracts, the liquidation of the Ringgit, Philippine peso, Thai baht, and Indonesian rupiah currency forward contracts was carried out as early as early November, after all, the Hang Seng Index futures contracts held by Liu Si were too large in ringgit, Philippine peso, Thai baht, and Indonesian rupiah currency forward contracts, so they had to be cleared early, otherwise it would be troublesome to enter the delivery process.

Short positions in Thai baht, ringgit, peso, and rupiah forward contracts totaled $168 billion. The forward contract in September closed 73.132 billion US dollars, and now the short position of Thai baht, ringgit, peso, and Indonesian rupiah forward contracts in Xinjiapo in December is 94.868 billion US dollars, and the average currency depreciation of the four countries is about 53.21%, that is, after closing the short positions of Thai baht, ringgit, peso, and Indonesian rupiah forward contracts, Liu Si will have another 50.48 billion US dollars.

The cost of short positions in the Hang Seng Index contract held by Shun Tak Fund is 15623.12, and the Hang Seng Index fluctuates between 10000~9000 when Shun Tak Fund closes its position. Of course, the points of the Hang Seng Index contract will not be completely consistent with the Hang Seng Index, and on the whole, because of the shorting of European and American capital, the points of the Hang Seng Index contract are dozens of points less than the real-time Hang Seng Index points.

To tell the truth, it is easier for Shun Tak Fund Hang Seng Index contracts to be liquidated than the ringgit, Philippine peso, Thai baht and Indonesian rupiah currency forward contracts in Xinjiapo, and in just half a month, Shun Tak Fund closed 57.12% of the contracts. The average yield is 39.67%, which means that Liu Si earned a total of $3.626 billion from the $9.1392 billion Hang Seng Index forward contract that was closed.

So far, there are still $6.8608 billion of Hang Seng Index forward contracts left in the contracts that have not been closed, and Liu Si estimates that the remaining contracts should yield more than 43.1% because of the post-flattening, which means that the remaining $6.8608 billion Hang Seng Index forward contracts can bring Liu Si $2.961 billion in income.

Shun Tak Fund was the first to close its position by borrowing the Hang Seng Index forward contract from the Baifuler Seat Futures Account, and all of them have been liquidated. After all, now that Pefler is in a financial crisis, the Shun Tak Fund has to prevent Peferer from misappropriating the Shun Dog Fund's Hang Seng Index forward contract in the Pefler Company, which is a cash asset of nearly $4 billion. You must know that today's total assets of Baifuller are about 3.5 billion US dollars, and the net assets are pitiful, and the liquidity is completely almost non-existent compared to an investment bank as large as Baifeer.

As the deputy head of the Shun Tak Fund, Qin Rui received Du Huilian, but when he heard that Du Huilian sought Shun Tak Fund to subscribe for Baifuler's convertible bonds.

Qin Rui was surprised to hear Du Huilian's request, because the previous month, Liu Si had conveyed to him that when Du Huilian and Liang Botao came to Shun Tak Fund to buy Baifuler convertible bonds, they needed to explicitly refuse. But at the same time, he also said that he could convey the reply that Xingyu Holdings (Hong Kong) Co., Ltd., the holding company of Shun Tak Fund, could wholly acquire Baifuler at a price of 100 million Hong Kong dollars.

When Du Huilian heard the reply of Shun Tak Foundation, he immediately got up and left angrily. Of course, because of this, Shun Tak Fund's lowest Hang Seng Index futures contract is the forward contract on the Pefowler Securities seat.

In fact, most of Peregr's own assets are of high quality, except for Peregrine Fixed Income Bond Company and Peferel Securities Company.

In 1994, Peregrine Fixed Income Bond Company was established, and since then, the business development of fixed income bonds and notes has been amazing, and the income of fixed income bonds has doubled continuously from 1995 to 1997, accounting for about 80% of the group's total operating income, and fixed income bonds have become one of Peregrine's main business and profit sources.

However, PFIL likes to make large transactions that are much larger than its own size, and often leaves a portion of the newly issued securities that cannot be sold, and the number of bond inventories and derivatives open interest in its hands gradually increases. At the end of October 1997, when Peregrine showed red flags, the treasury bonds had reached US$1.15 billion, of which US$280 million, or 25% of the total inventory, had been stagnant for more than three months. At the end of 1997, when Peregrine was finally struggling, illiquid bonds rose to an all-time high of $410 million, accounting for 59% of total inventory.

The serious problem is that those illiquid bonds that have been stagnant for more than three months are still classified as liquid trading assets in the group's books, along with other treasury bonds, but in fact, according to Peregrine's own regulations, trading assets are not allowed to be held for more than three months, and these illiquid bonds should no longer be classified as trading assets, and must be reclassified on the accounts and classified as investment assets, but unfortunately, this policy has not been strictly implemented.

In May 1997, Peregrine pledged to provide a package of funds for the investment activities of SteadySafe, an Indonesian taxi company, by issuing up to US$350 million in fixed-rate bonds over five years. However, when the Southeast Asian financial crisis broke out in July 1997, the currencies of Indonesia and other Southeast Asian countries continued to depreciate sharply, and the repayment ability of the companies issuing fixed-rate bonds declined.

Peregrine Fixed Rate Bond Company, as the largest bondholder in Southeast Asia, is at the top of the Asian financial crisis

Peregrine Fixed Rate Bond Company is one of the largest bond dealers in Asia, and the collapse of Southeast Asian currencies and stock markets during the Asian financial crisis caused irreparable losses. Peregrine's operations in other countries in Southeast Asia have suffered varying degrees of damage from the crisis, with Thailand being the most severely damaged. So you can imagine how much Baifuler has lost, conservatively estimated at more than $1 billion.

At the beginning of October, the Southeast Asian financial market blew another round of decline. On October 17, the Taiwan authorities suddenly announced that they would abandon the exchange rate of NT$28.48 to US$1 that they had always adhered to, allowing the NT$ to float freely, and on October 21, the NT$ fell to a 10-year low of NT$30.7 to US$1. The depreciation of the new Taiwan dollar has become the east wind that international speculators are looking forward to, and the financial turmoil has moved eastward. Marked by a HK$3 billion sell order in the London foreign exchange market on the evening of October 22, international speculators attacked on all fronts and started a new round of sniper warfare against Hong Kong. Long-term investors' confidence in Hong Kong's linked exchange rate system has been shaken by speculators' massive short-selling of Hong Kong stocks and the exchange rate of Hong Kong dollars, with a total of HK$100 billion sold. In order to avoid losses. They also joined the sell-off of Hong Kong stocks and exchange rates, and the underwriting banks were also forced to sell Hong Kong dollars to hedge. As speculators, underwriter banks and long-term investors are selling off the Hong Kong dollar, the Hong Kong dollar exchange rate is under strong pressure in both the spot and forward markets. The exchange rate of the Hong Kong dollar was close to the bottom line of HK$7.75 to US$1, while the one-year forward rate fell to the level of HK$8.02 to US$1.

However, due to the fact that international speculators use the method of attacking the east and the west, they sell the Hong Kong dollar with one hand and attack the stock market with the other. The Hong Kong stock market plummeted as the Hong Kong dollar sold off sharply and the monetary tightening measures taken by the Hong Kong Monetary Authority led to a sharp rise in interest rates in the Hong Kong interbank market. On October 20 (Monday), the Hang Seng Index opened at 13,600 points and fell all the way. October 23 was an unfortunate day for Hong Kong investors, as the Hang Seng Index plummeted from 11,700 points to 10,426 points, a drop of 10.4%. In terms of points, it exceeded the drop of 1,120 points on "Black Monday" on October 26, 1987. On 24 October, the Hang Seng Index rebounded slightly, but on 28 October, the Hang Seng Index plunged again by 1,438 points, setting an all-time record of closing at 9,059 points. From October 20 to 28, the Hang Seng Index fell 4,541 points, or 33.4%, in just a few days. Based on the $300 billion market value of the Hong Kong stock market on July 3, "it had lost more than $140 billion by October 28." The market capitalization of red chips fell from $45 billion to $19 billion during the same period, with a loss of $26 billion.

The continued plunge in Hong Kong equities has also exacerbated the internal injuries of Peregrine, who holds more than 20 listed warrants and has an estimated number of shares to hedge at more than HK$3 billion, and the collapse of the Hang Seng Index has caused heavy losses to Peregrine, which has a large shareholding. Peregrine's stock losses between July and October 1997 were at least in the hundreds of millions of Hong Kong dollars (estimated to be nearly HK$1 billion).

Under the double blow of foreign exchange risk and stock market decline, Peregrine's overall loss was about $1.5 billion. Because of this, Liu Sike did not dare to buy the convertible bonds of Baifuler Company. Because the reason why Baifuller caused this situation is also related to its own problems, if Baifuller does not change its management and management model, Baifuller will not be able to save itself by issuing more bonds to raise funds.