thenovelthief Chapter 107
Chapter 107
Translator: DreamscribeSouth Korea's National Pension Service is the third largest in the world.
In contrast, Singapore’s pension fund is the eighth largest.
But there is a difference between the Singapore and Korean pension funds.
That difference is investment.
The Korean National Pension Service invests in the safest assets possible to generate returns, but the Singapore pension fund does not separately operate its money.
Instead, they hand over the surplus funds from the pension to the government in the form of loans, and the government passes that money elsewhere.
These are the two pillars that play the core role in Singapore’s international financial hub: GIC and Temasek.
“The funds these two manage are larger than the Korean National Pension funds, right?”
“Yes. They are slightly larger. The combined amount these two institutions handle is 620 billion dollars.”
The sovereign wealth fund and the state-owned investment company owned by the Singapore government.
The financial power these two manage is greater than that of the Korean National Pension Service.
That is why they are the first to be deployed when Singapore faces a national financial crisis.
“The Singapore government has also begun halting the market as panic selling continues, and GIC and Temasek have started liquidating the shares they hold.”
Reynold, who was receiving the report, nodded.
“Does that mean they’re liquidating the assets they’ve spread overseas?”
“Yes. The problem is that these two institutions hold many shares in Singaporean domestic companies and a lot of real estate. They’ve begun mass selling in real estate as well, and because of that, not only Singapore’s internal stock prices but also the real estate market have taken huge hits.”
“And since the two institutions hurriedly dumped the shares they were holding onto, the entire global market is shaking.”
Singapore’s sudden financial crisis was not merely that country’s problem.
First, the funds flowing into Singapore are the issue.
Singapore stands shoulder to shoulder with Hong Kong as Asia’s financial hub.
In other words, burying money here was considered relatively safe.
But that trust has been broken.
Second, the sovereign wealth fund and the public investment institutions run by Singapore are hastily dumping their shares to secure ammunition, delivering a shock to the global markets.
The reason they are dumping shares so urgently is because they must stabilize Singapore’s collapsing stock market as soon as possible.
If they do not inject emergency funds to stabilize the market, they will lose their status as an Asian financial hub.
If that happens, it will be the worst-case scenario for Singapore.
“So they are desperately trying to put out the fire.”
“At this level, the market will stabilize, right?”
“Yes. Since GIC and Temasek have stepped in, it seems the market will soon stabilize.”
There is a method to stabilize the market.
They can force the stock prices up by injecting massive amounts of capital.
“The problem is that Singapore has taken enormous damage in this incident. If they had to dump the shares they were holding to raise ammunition, that means the crisis was that severe.”
“On top of that, their honor as an Asian financial hub on par with Hong Kong has been tarnished. Above all, this must have been the most painful part for the Singapore government.”
The period when Singapore gained the most international acclaim was in 2008.
When the global financial crisis known as the subprime mortgage crisis erupted, Singapore swiftly utilized its institutions to stabilize the market and went further to create a stable market flow.
From then on, it was recognized as Asia’s representative financial hub.
But ironically, when a financial crisis broke out inside Singapore itself, their response was slow.
“It was probably hard to predict. Singapore is recognized worldwide as Asia’s financial hub. Nobody could have imagined that some crazy guy would walk into such a stable and large market with bombs strapped all around him.”
Countless forces had tried to shake the Singapore market until now.
But all returned empty-handed.
This time, however, the bomb was real.
“Even after this incident stabilizes, it will be awkward for the Singapore government to take measures against Kwangwoon Securities. Because the decisive cause of this financial crisis was ultimately the EU and the Singapore government themselves.”
When someone attacks, it is natural to retaliate.
They say an eye for an eye, a tooth for a tooth.
But the Singapore government had nothing they could do.
EU and several other countries stepped in and forcibly dismantled Kwangwoon Shipping.
They were now paying the price for that.
“In fact, Singapore wasn’t the only one damaged. As the two institutions hurried to liquidate their holdings, other overseas markets were hit as well.”
“So in summary, Kwangwoon retaliated? Not just against Singapore but against various markets around the world?”
“Yes. Since all major markets took damage from this, it’s as if Kwangwoon vented its anger properly.”
The more he heard, the more absurd it became, and a hollow laugh slipped out.
They dismantled that company by force, and in retaliation, it shook the entire global financial market.
“You could say it was extremely calculated. There was a reason Kwangwoon didn’t resist and quickly split the company according to the EU’s orders. It was a fight they couldn’t win anyway, so they tried to maximize their gain.”
"From start to finish, very much like Kwangwoon."
“Yes. And only Singapore, which had merely been helping from the side, ended up getting pummeled. More importantly, thanks to the cooperation from the Korean government, a lot of capital that was flowing out of Hong Kong is now pouring into Korea. In the end, Korea also made huge profits by betting on Kwangwoon.”
Before the Singapore incident, the Korean government swiftly adopted financial easing policies and did everything it could to attract foreign capital.
“But can a government really coordinate that well with corporations?”
“Korea is originally famous for being extremely fast in administrative matters. On top of that, the ruling party currently holds the highest number of seats in history, and since they know public sentiment will swing violently if they fail to control the skyrocketing real estate prices, it seems they gave their full support this time.”
So the Korean government helped because it was something that brought them enormous benefit.
Their gamble seemed to have paid off greatly.
“But not all the capital flowing out of Hong Kong has entered Korea.”
“Still, they must have taken more than half, right?”
“Yes. Even that much can be called a huge success.”
They took the damage from the forced dismantling of the shipping division and turned it into an opportunity by collapsing the Singapore market to reap huge profits.
And at the same time, they successfully shook the markets of the countries that helped dismantle their company.
They vented their anger and made money.
No matter how many times he thought about it, Kwangwoon was a crazy company.
But strangely, something still felt off.
“Would Kwangwoon really be satisfied with just half?”
“They must have earned enormous profits from this short selling. They’re already in the process of closing their positions.”
“Yeah. But they didn’t completely destroy it. Something feels off about them stepping back like this.”
“You mean you believe Kwangwoon has one more blow prepared?”
But no matter how much Reynold thought about it, he couldn’t imagine what additional strike Kwangwoon might be preparing.
“No matter how insane Kwangwoon is, there’s nothing more they can do at this point.”
Yeah. That must be true.
Even so, it was strangely hard to shake off this uneasy feeling.
“What’s the next item?”
“Due to the current US-China trade war, the BDI index is.......”
While reviewing the agenda, an unusual report came in.
“What? Where?”
"Patients with pneumonia of unknown cause are increasing in Wuhan, China. It's been officially reported to WHO."
Reynold immediately frowned.
“But why are you reporting that to me?”
“It’s because you said to report anything virus-related, Director-nim.......”
That instruction had been given back when Kwangwoon was buying up all the pharmaceutical companies in the UK.
“Pneumonia?”
It’s true that pneumonia can be caused by viruses, but it can also come from other causes.
“What I meant wasn’t pneumonia like this. I meant a truly serious virus. There’s no need to report trivial things like this.”
“Ah, yes. I’m sorry.”
And Wuhan, of all places.
A place he didn’t even know where exactly it was.
Reynold was busy listening to other reports and had already forgotten the name of that region.
***
As befitting its reputation as the financial leader of Asia, Singapore fortunately succeeded in using the institutions it controls to pull the market back from the brink after it had entered a massive crash.
“On the surface it may look stabilized, but Singapore took a very serious blow. Honestly, I was surprised. I didn’t think there even existed a way to inflict damage of that magnitude on Singapore. Haha.”
“Yes. Thanks to that, the amount of foreign capital flowing into our country is enormous. While the entire global market was shaking due to Singapore, only our KOSPI shot up like crazy because of that capital.”
Seeing Singapore falter, the capital leaking out of Hong Kong flowed into Korea.
Our government quickly stepped in, opened up the market through easing measures, and thanks to that capital, only our KOSPI index surged, resulting in massive gains.
“Since we achieved this much with the first round of easing, the government plans to implement additional deregulation. For example, they’re considering raising the upper daily price limit from the current 40 percent after the first easing to 50 percent.”
To show that this opening was genuine, the government raised the price limit, which had been fixed at 30 percent, to 40 percent. And now they intended to raise it further to 50 percent.
But this was a double-edged sword.
There was a reason the domestic market’s price limit had been set at 30 percent.
It was to suppress the various operation forces that would inevitably swarm in.
If they raised it to 50 percent, those forces would run even wilder.
Even so, they were pushing ahead with deregulation because a massive amount of foreign capital had entered the country, enough to completely wreck those operation forces in return.
Funds that hunt only those short sellers.
The so-called activist funds.
If such capital comes in en masse, short selling forces naturally decrease, and companies can grow through the support of those funds.
Because in the end, those funds also enter with the intention of growing the company and then selling it.
“That’s why the government internally is evaluating this outcome extremely highly. People in finance are even calling it a miracle. They never imagined you would use the dismantling of the shipping division to pressure the Singapore market that heavily.”
I only gave a faint smile.
These compliments were burdensome, and honestly, even sitting here in this seat felt the same.
“You flatter me. And besides, we had no intention of deliberately collapsing the Singapore market.”
“Ah. I... I see?”
“Yes. More importantly... what brings you here today?”
The leader of the National Pension Service is the Chairman.
Chairman Choi Hyun-tae and his direct subordinate performing his role, Headquarters Director Cho Sang-sik, had personally come to our company.
“We actually came because we have something we need to discuss deeply with you, CEO-nim.”
“If it’s about matters related to the Group, wouldn’t it be better to meet the Chairman rather than me...?”
“At first, we also intended to meet the Chairman, but we were told discussions on financial matters would progress much faster with you, CEO-nim. And we also have ears, you know. We’re well aware of who the true power of Kwangwoon Group is.”
Even so, I hadn’t expected the National Pension Service, let alone its top leader, to personally come find me.
“Have you perhaps seen the announcement our pension recently released?”
“Ah, yes. There’s been a lot of talk about it, hasn’t there?”
Recently, the National Pension released statistics.
Shocking statistics stating that the pension fund was not far from depletion.
“Yes. It must have been quite a shock to the public. If we don’t reform the National Pension as it is, the fund will be completely depleted around 2057.”
The National Pension becoming depleted in 2057.
Unfortunately, this is reality.
In fact, the National Pension’s rate of return is fairly good.
There is a reason people in securities firms say only monsters work at the National Pension Service.
But even so, the National Pension is destined for depletion.
“Moreover, that statistic was created under the assumption that we earn an annual return of 4.5 percent. Meaning, if the rate of return drops any lower than that, the pension will be depleted even faster.”
They were managing over 700 trillion won.
It was the third largest scale in the world.
And yet they still could not prevent depletion.
“We believe this is the last golden time.”
“You mean that if reform doesn’t happen now, it will be too late?”
“Yes. But honestly, what administration would dare attempt reform? Reform means everyone must start paying double the current amount, and politicians, who are most sensitive about votes, would never accept that.”
This was the core of the National Pension problem.
Everyone knew reform was needed.
But no government would attempt it.
Because they all knew they would lose votes in a landslide if they tried.
If you suddenly tell citizens who are working hard that starting today they must pay twice as much into the pension, how would they react?
“It’s the irony of democracy. Even when something is desperately needed for the country, we can’t push it forward because of votes.”
It was a very heavy topic.
“We have prepared a few measures. One of them is the ISA. Since it is difficult for the state to take responsibility, we give individuals an account so they can prepare for old age by themselves. We also offer tax benefits.”
ISA.
The so-called Individual Savings Account.
The government officially denies it, but the reason ISA was introduced was that pension depletion became a realistic threat, so they created a system for citizens to prepare for retirement by themselves.
“But this is ultimately just shifting responsibility. If we do not solve the fundamental problem, future generations will have to bear immense burdens, and the resulting social chaos will be indescribable.”
A major factor that dragged the National Pension down was the plummeting birth rate.
In other words, future generations will be drastically smaller than now, and aging will push the system into catastrophe.
“This is the report our team produced. If you skim through it, you’ll immediately understand our situation.”
I opened the report handed to me by the Headquarters Director.
Then, as if waiting for that moment, vivid visions poured before my eyes.
“!?”
Conflict between generations.
Political chaos.
Collapse of the economic system.
Riots breaking out throughout city centers.
The Republic of Korea, once brilliant and beautiful, was burning black.
What was terrifying was that this future was not far away.
“While discussing this issue, a thought occurred to us. Kwangwoon is achieving accomplishments that will be recorded in financial history. If we could learn the data and investment techniques handled here at Kwangwoon Securities, perhaps we could solve this fundamental problem.”
“Our target return is 5 percent annually. But if, with Kwangwoon’s help, we could raise this even to 8 percent, we could delay the depletion date as much as possible. And we wouldn’t need to increase the burden on the people.”
Annual returns of 5 to 8 percent.
To people in investment, these returns are very small.
But one must remember that they manage a staggering 700 trillion won.
In other words, maintaining even 5 percent every year is close to a miracle.
And even performing such a miracle still results in pension depletion.
“That is why we want to learn the investment system of Kwangwoon Securities. How you analyze the market, what algorithms you use to extract data, how you make investment decisions, and so on. If you would share such methods with us, we would be truly grateful.”
But what if they didn’t stop at 5 percent and could raise the return even further?
Not 5 percent, but up to 10 percent.
No, what if they could achieve up to 20 percent annually?
“.......”
I placed my hand on the report again.
“......!?”
This time, images completely opposite of earlier flashed before me.
A Korea shining far more brilliantly than before.
“Even simple advice would be fine. We came with sincere desperation, so please do not turn us away.”
Unfortunately, I had no techniques to teach.
Our securities company did not analyze data with complex algorithms like other firms.
Instead, we used a simpler yet absolutely certain method to make investment decisions.
My intuition.
If I were to teach them anything, it could only be advice based on that.
“By any chance.......”
As I finally opened my mouth, after keeping it shut all along, the two men leaned forward.
"Do you also short?"
“......What?”
And soon, both of their faces were filled with bewilderment.