thenovelthief Chapter 130
Chapter 130
Translator: DreamscribeAt the beginning of the coronavirus outbreak.
Prices of related assets such as REITs and real estate funds plummeted across the board. (TL: REITs = Real Estate Investment Trusts)
It was a result of a global financial market panic sell-off, and the crisis was further exacerbated by people staying indoors due to COVID, leading to the closure of numerous businesses.
However, the plunge was only temporary, and a quick rebound followed.
This was thanks to the stimulus measures introduced by governments.
With emergency actions such as low interest rates and the supply of liquidity, REITs and real estate funds began to rise explosively.
“But why did that booming market suddenly collapse?”
Investments in real estate sectors, including REITs, were extremely hot.
Because of the explosive growth trend and high dividend yields, people's money had flocked in.
As a result, many funds had invested in REITs, reaping high dividends.
“It’s because of Losthood. A digital bank run occurred, and people began to dump the shares they held, and more seriously, the situation worsened when Losthood suspended trading. On top of that, a lot of Losthood members held shares in REITs......”
“Adding to that, seeing Losthood suddenly fall apart weakened investor sentiment, and with talk spreading that even the real estate sector known for its high dividends might be dangerous, everyone started selling off their holdings.”
Real estate companies, which had been enjoying the full benefit of government policies, began to stagger. The problem was that the ripple effect was spreading not just in the U.S. but all over the world.
“Losthood pulling the buy button definitely escalated the situation, but honestly, it was something we could have gotten through. There would have been lawsuits, but as long as we handled it well with legal defenses and kept people from falling into panic, we could’ve managed.”
“But now it’s turned out like this because Kwangwoon stepped in?”
“Yes. Just when things were fragile, Kwangwoon filed a $100 billion lawsuit and absorbed a large number of Losthood members, triggering a seismic shift. After selling off all their shares, Losthood members are now moving over to KW Exchange.”
“The stock price was already shaky from all this, but now the bubble crisis theory triggered by Losthood is gaining attention, delivering a direct blow to our real estate market. No, I should say it’s shaking the entire stock market.”
As he listened to the reports from the executives, Xu Jiayin, Chairman of Evergrande Group, took off his glasses.
“But what does that have to do with us? We didn’t operate REITs, did we?”
“No. There’s no direct connection, but indirectly, and critically, we are involved. Firstly, the financial institutions and funds overseas that supply us with capital have taken damage, and as the overall real estate market suffers, the value of the real estate we offered as collateral is plummeting.”
“So what?”
“As the value of our collateral drops, the other party can only demand larger collateral or pressure us to repay the loans. Then, in order to raise funds, we would have to issue bonds again, but right now, bonds from real estate companies are crashing in value, and no one is buying.”
Only then, upon grasping the situation, did the hand holding his glasses begin to tremble.
“We didn’t even do anything wrong. So KW Exchange... In other words, Kwangwoon tried to crush their competitor, Losthood, and we ended up getting hit by the fallout?”
“Yes. It's more like we were hit by a stray bullet rather than just caught in the crossfire.”
Even though physically far apart, the world now moves as if it's one body.
That’s why, when a hole opens in one place, other places inevitably suffer chain damage.
Who could have predicted that a fight over exchange rights in the U.S. would end up shaking the real estate market?
“So what happens now? Doesn’t this mean our plan is falling apart?”
Evergrande Group is facing a bankruptcy crisis.
But they are still hiding that fact from the outside world.
Evergrande’s current debt stands at $300 billion.
They’ve reached the point where they can’t even handle the interest on the maturing debt.
So what must be done?
There’s only one option left for them.
Sell off everything that could bring in money, and then bankrupt the company.
“But contrary to our expectations, the sudden collapse of the real estate market made it difficult to raise funds, and with pressure to repay loans beginning, it’s become hard to proceed with the original plan...”
“So the plan that was supposed to unfold over the next five years has been blocked right from the start?”
Realizing there was no way to save the company, Evergrande Group had devised a five-year plan to slowly sell off and dismantle the company piece by piece.
They would file for bankruptcy in a New York court, drag things out with a performance for a few years, and finally receive a formal bankruptcy ruling from a Hong Kong court.
Then, just as prearranged, the Chinese government would impose an $800 million fine.
By that time, there would be nothing left in the group anyway.
It was a perfect plan to eat well and get out.
But for it to fall apart from the very beginning?
“Find a way, no matter what! Why do you think our government approved this plan in the first place! Sure, they wanted to line their own pockets, but more importantly, it was to minimize the shock to the Chinese market!”
Evergrande Group is the number one construction and real estate company in China.
If such a company were to collapse, it would be no different from triggering a Chinese version of Lehman Brothers, so the Chinese government had tried its best to soften the blow.
“But if the company goes bankrupt much faster than planned, then the entire Chinese real estate market will collapse. Do you understand? Everything we have will vanish before we even get the chance to line our own and the higher-ups’ pockets! Do you think they’ll let us off the hook?”
If it's just a matter of playing along with the top brass and getting out clean, no one will say a word.
But shaking the entire Chinese market and collapsing the real estate sector is a different story.
In that case.
Someone will have to take responsibility.
Not with money, but with blood.
“Everyone in this room could disappear without a trace.”
In China, it’s not uncommon for businessmen, even a chairman of a group, to be executed.
If this incident spreads seriously, it would not be a joke if a few here were dragged to the execution grounds.
“So everyone, find a way! Quickly!”
The executives, realizing a blade was now pressed to their throats, hurried to act.
After sending the executives off, Xu Jiayin was left alone with his secretary and let out a deep sigh.
As if it wasn’t already painful enough to watch the group he’d built over so many years be dismantled, now this had happened too.
“But about Kwangwoon.”
“Yes, Chairman.”
“Do you think those bastards really didn’t know that crushing Losthood like that could collapse the real estate market?”
“...Sorry?”
“Do you think I don’t know what kind of people Kwangwoon are? They’re the lunatics who blew up the Port of Tianjin to wipe out the Dragon Sea Alliance. There’s a lot of talk that the recent explosion at the port in Lebanon was their doing too. Those bastards know exactly what they’re doing, and why they’re doing it. They understand full well how a single event can affect other countries.”
They didn’t foresee this fallout from the Losthood incident?
And this just happens to explode right when Evergrande is quietly trying to liquidate assets?
“Can we really say this is a coincidence?”
“But Kwangwoon is foreign capital, so they can’t buy the real estate we hold. There’s no profit to be gained from targeting us, is there?”
Foreign capital cannot own land in China.
They can lease, but they cannot purchase.
And Evergrande Group is in construction and real estate, right?
Most of their assets are in real estate.
Even if Kwangwoon wanted to scoop up those assets at rock-bottom prices, they couldn’t.
“That’s true, but...”
Even so, he couldn’t shake this ominous feeling.
Because it was Kwangwoon behind all of this.
***
“Ramsey has sent a reply.”
“What’s their response?”
“Very positive. No, should I say they seem desperate to sell right now? That’s how financially tight they must be.”
Virena, a major grain company based in Canada.
Ramsey Corporation, which owned the company, accepted all our acquisition terms as they were.
“Since it concerns the nation's food supply, the approval of the Canadian government will be necessary, but it seems it will go through without any issues.”
“What’s the acquisition price?”
“10 billion dollars.”
“Not bad.”
“Yes. Also, as per your instruction, we’ve looked into other grain companies as well. Here’s the list.”
The grain industry had fallen into crisis due to last year's unprecedented famine.
As a result, many companies were experiencing financial difficulties.
“With the recent Losthood incident leading to the collapse of the real estate market, Canada also suffered considerable damage. Many of the holding companies in this sector were linked to real estate in some form.”
Even I hadn’t expected that the fall of Losthood would end up damaging the real estate market.
This is why the financial market is so terrifying.
When one thing collapses, you never know what else will fall with it.
“.......”
I skimmed through the list.
With the famine compounded by the real estate crash, quite a few companies had come up for sale.
Among them, several companies were practically glowing, pleading to be chosen.
I marked only those companies and handed the list back to the department head.
“You picked companies all centered around Alberta?”
Alberta is a region in western Canada.
But in truth, I hadn’t selected them based on location.
“Yes. Please relay to the group to negotiate and acquire those companies. It’s not an investment using our securities firm’s money anyway.”
“Ah, yes. I’ll do that.”
To suddenly have a intuition about something like grain, of all things.
Honestly, something about it felt strange.
And that vision I saw through my intuition the other day...
It was horrific, so much so I didn’t want to recall it.
That eardrum-shattering explosion and the screams.
Could it really be a war breaking out?
But war, in this day and age?
If that escalated into nuclear war...
Wouldn’t everyone die then?
Grain warehouses or whatever, none of it would matter.
Humanity would be wiped out anyway.
‘If it were really like that, the vision would’ve told me to buy a bunker instead.’
Right. For now, I need to stay calm.
I just have to pray that such a horrible war never comes to pass.
“What about other matters?”
“Ah, we keep receiving reports that something unusual is happening in China.”
“China?”
“Yes. With Evergrande Group’s debt surpassing 300 billion dollars, their credit rating has been downgraded, and due to the devastating impact on the real estate sector, the value of all their assets has plummeted, they’re on the brink of bankruptcy.”
I had read in several research reports over the past few years that Evergrande Group had been expanding too recklessly.
But this time, the company, whose core business is construction and real estate, held out and held out, only to finally blow up now.
“Is it really that serious?”
“Yes. It’s Evergrande Group, after all. The company was already in crisis, but they were trying to go through bankruptcy procedures slowly to minimize market impact. However, with this massive real estate crash, they couldn’t plug the holes anymore.”
“As a result, the Chinese real estate market is shaking all at once, and a wave of bankruptcies is spreading.”
If a giant like Evergrande had collapsed, there was no way the Chinese real estate market would remain unscathed.
“But the problem is that with Evergrande collapsing and multiple construction firms being swept away, China’s large-scale projects that were underway are now at risk of being scrapped.”
“What kind of projects?”
“New natural gas pipelines and terminal installations. Two years ago, China unusually started accepting foreign capital and began expanding natural gas production and imports. But now, with all the construction companies collapsing, every project that was supposed to proceed has come to a halt.”
China is the third-largest consumer of natural gas in the world.
Half of that is produced domestically, and the other half is imported.
As consumption continued to rise, they had been building new terminals and pipelines to bring in more natural gas.
Those very projects had now been scrapped.
“As a result, China has canceled all contracts. Thanks to that, countries like Russia, Australia, Qatar, the U.S., Indonesia, and Malaysia, who were selling natural gas to China, are now stuck with surplus supply.”
In fact, natural gas prices were currently peaking.
But if China, the third-largest consumer, cancels its contracts, there will be a surplus of supply, and that will inevitably lead to a price drop.
“So right now, natural gas prices are fluctuating wildly. Since the world’s third-largest consumer suddenly canceled its contracts, a massive volume has been dumped into the market.”
“......!”
And right then, my intuition was shaken.
A very strong, distinct signal, like something was calling to me from this natural gas.
Could it be... that I’m being told to buy this natural gas?
Futures?
“.......”
But I didn’t get a strong feeling from the idea of buying it as futures.
It was just a faint, passing flicker.
Which meant.
“What if we were to buy up that natural gas in bulk?”
“O-our firm, Kwangwoon Securities? You mean as futures...?”
“Futures too, but what I mean is, could we actually purchase and store the physical natural gas?”
“......What?”
At those words, Department Head Seo’s drowsy eyes opened wide.
“A-all of that massive volume China was supposed to take?”