The Tiger Fund currently holds a position in Thai baht that converts to around $2 billion in US dollars. In fact, hedge funds with close ties to Wall Street and Druckenmiller are hitting the baht, but not as much as they did when they hit the pound and the franc. You must know that at the time of the pound attack, the Quantum Fund alone established a short position of more than $10 billion.

It's okay to explain Soros's hedge fund in terms of compassion and fear that the baht will get out of control and lead to a serious economic crisis, but it is not at all the same for hedge funds like Tiger Fund. Julian. Robertson does not see himself as a philosopher, a social activist, or a moral motives that arise from the loss of thousands of jobs as a result of the depreciation of the baht.

The only thing that can stop him from expanding his positions indefinitely is cost.

In the UK, France and other countries, the market is highly liberalized, and in the interest rate market, the overnight interest rate is also formed by the quotation of a consortium of banks, which cannot be determined by the central bank or the government. Therefore, when attacked, the British and French governments can only attract the inflow of foreign capital by raising interest rates, so as to relieve the pressure of selling pounds in the spot market.

Later, when the currency crisis spread to the whole of Europe, some countries used mandatory executive orders in some areas to deal with the impact of hedge fund selling, because the marketization was not highly developed, and the Swedish government used outrageously high overnight lending rates to deal with the attack of hedge funds.

Obviously, this trick will naturally be used by other central banks around the world. BOT decisively used this trick when the baht was hit hard. Increase the offshore lending rate to 1000% to 1500%.

The offshore call rate is a concept derived from the call rate. Because of the opening of a country's financial markets, there will inevitably be the entry of foreign banks. The market that does not use the national currency within the domestic territory is called the offshore market, and this market is naturally dominated by foreign investors. The offshore lending rate, on the other hand, is simply the interest rate for foreign investors.

In Thailand, this trick is used in conjunction with a mandatory executive order to cut off the possibility of foreign investors borrowing Thai baht from local banks. As a result, speculators, even if they borrowed Thai baht from local banks, could no longer borrow short-term loans from local banks, and had to borrow Thai baht from foreign banks with high interest rates.

When these two tricks are used together, it can really be described as a two-pronged approach. First of all, most of the baht lending business is carried out between local banks. This fundamentally cuts off the possibility for speculators to continue to expand their short selling. Secondly. For those foreign banks, if they want to lend short-term interest rates, they must borrow Thai baht from local banks at a very high interest rate, and then release money to speculators at a higher interest rate. This has undoubtedly increased the interest rate burden on speculators.

Tiger Fund is a typical "victim" role.

Julian. Robertson had predicted that the Thai government and the Bank of Thailand would respond to the foreign exchange market shock by raising the call rate. Preparations were made accordingly. But he didn't expect it. The Thai government's decision to prohibit local banks from lending money to foreign speculators has completely vanished his preparations.

Originally, Tiger Fund's wishful thinking was to lend a large short-term loan through a local bank in Thailand. Then sell in the market. This kind of short-term loan is 7 days, 14 days, etc., and after the loan matures, the corresponding amount of Thai baht is borrowed from other banks, and the previous Thai baht loan is repaid, and the position is maintained through this repeated cycle.

Generally speaking, interest rates such as overnight loans, 7-day loans, and 14-day loans show a gradual upward trend. Although the overnight call rate is the lowest, it is not possible to short the Thai baht by borrowing the overnight call because this type of loan is too short. Loans in the form of 7 days and 14 days are very operational, and the Tiger Fund can use this time to break the baht.

But now all is impossible. Because they can no longer borrow from local banks to extend their loans, they must borrow Thai baht from multinational banks with Thai baht operations at 1,000% or higher interest rates if they want to maintain their positions.

"How much do we lose in the futures market?" Although Julian was very angry, he could only endure this breath at this time, after all, the opponent was the central bank of a country.

In addition to borrowing the baht, Tiger Fund, like most hedge funds that short the baht, is also aggressively shorting the baht exchange rate contract. When Thailand announced two measures to deal with hedge funds, futures contracts reacted immediately, causing them to lose a lot of money.

"About $20 million." A man named Billy. Kim's analyst replied dejectedly. A native of South Korea, he holds a bachelor's degree in economics from UCLA and an MBA from Carnegie Mellon University, has worked for Hyundai Securities and Peregrine USA, and is now an analyst at Tiger Fund specializing in Asian markets.

In Singapore, London and Chicago, Tiger Fund sold more than 600 short baht contracts, and the strong rally in the baht not only wiped out their previous profits, but also cost them dearly.

Billy. After Kim finished speaking, he looked at Julian. Robertson, cautiously probing: "Are we going to stop the loss and leave the market?" "He's already thinking of throwing in the towel.

"No!" Julian. Robertson decisively denied, "Not only will we not close the position, but we will further increase our shorting efforts until the Thai side declares that it will admit defeat." ”

Despite suffering heavy losses, Julian. Robertson didn't care. In fact, he is a very forbearant person, and forbearance here naturally refers to forbearance in the capital market.

There was once such a true story, which came out from within the Tiger Fund, that is, when the Japanese stock market crashed in 90, the Tiger Fund once shorted the Nikkei Index near the highest point, and these sell orders have not been closed, and even held until 97, a full 7 years. At that time, the Nikkei index had fallen by two-thirds from its peak, which can be seen from Julian. Robertson has forbearance in the capital market.

"But with our current position, the interest paid every day is a lot of money." Billy. Kim felt compelled to remind Julian that at the rate at which they could now borrow baht, the cost of holding it would be astronomical if the baht did not depreciate for a day.

"How much, have you counted?" Julian. Robertson's face didn't change in the slightest, as if he was saying something unrelated. But his slightly trembling hands betrayed his true inner thoughts.

Billy. Jin lowered his head and made a quick calculation in his mind, and when he raised his head again after half a day, his whole face had changed.

"If we were to maintain our current position, we would be paying as much as $10 million in interest per day." His voice was already trembling slightly as he spoke.

The essence of the Thai baht borrowed at the punitive rate of 1,500% is that these $2 billion positions are saddled with such an interest rate, not taking into account changes in the exchange rate. In fact, the Thai baht has risen by one percentage point against the dollar, and this figure will continue to rise.

"So much?" Julian. Although Robertson was mentally prepared, he was still taken aback when he heard this number. Although it was very expensive, it still did not dissuade Julian. Robertson's determination to short the Thai baht, "It seems that the short selling is going to step up. ”

See Julian. Robertson had no intention of giving up. Jin Ye could only shake his head and turn to his own business.

……

A similar situation was constantly playing out on this day for hedge funds that shorted the Thai baht, and foreign exchange trading departments of commercial banks. Almost all people who are short the baht are aware that if the baht is not completely washed out in the next day or two, then it will be difficult for them to maintain their current positions.

This situation has only inspired the determination of most speculators, so that they no longer have any scruples to go on a short spree wherever they can sell the baht.

In fact, the Thai side is also aware of this situation, and at this time within the BOT, there is no joy in keeping the baht, and almost everyone realizes that the real decisive time is in the next trading day or two, or even a week. Punitive interest rate hikes and a ban on local banks are just the beginning.

"Haode, thank you!" In the Governor's Office, Malaja was on the phone with the Chairman of the Monetary Authority of Singapore, Gao Shengming, and it was the end of the conversation.

Since the announcement of the Thai side's counterattack on international speculative capital, the entire bullish market has been shaken up and has the confidence to continue to fight against hedge funds. The MAS, as an experienced company, immediately reminded the BOT of the counterattack of international speculative capital, and brought in a capital aid of up to US$8 billion, ready to intervene in the market together with the Thai side in the following period.

Singapore is well aware that once Thailand declares its loss, the next target for international speculative capital is likely to be Singapore. Singapore, which wants to be a Shijie financial center, is far more open in terms of finance than Thailand. I am afraid that the Singapore government will not be able to implement a series of measures that Thailand is currently imposing.

The best situation now is to let them sink into the sand and lose on the battlefield of Thailand before international speculative capital has yet to succeed. At that time, even if there are speculators who short the Singapore currency, I am afraid it will not be so easy.

On this day, the Singapore side also actively intervened in the market, but the main selling was taken over by the Bank of Thailand. Singapore estimates that the current BOT funds may be insufficient, so throwing an olive branch at this time does not mean to send charcoal in the snow.

Sure enough, Malajia was overjoyed, thanked him on the phone, and even bowed a little, without the slightest realization that the two sides were at the same level. (To be continued......)