November 11, 1997.
[KDB's $2 Billion Dollar Bond Issuance Indefinitely Postponed]
The bad news that came from across the Pacific over the weekend sent shockwaves through
Korea's already fragile stock and currency markets.
At the Korea Exchange Bank's trading floor in Euljiro, Jung-gu, Seoul, phones rang non-stop, and traders, their neck veins bulging, shouted with such intensity that the place felt like a war zone.
Beep beep! Beep-beep-beep!
"Bought 12 at 51.8!"
"What price did you just say?!"
"No, not five—ten!"
"Okay, done!"
Assistant Manager Na Woon-hak, a fourth-year foreign exchange trader, hadn't had time for lunch, let alone a bathroom break, as he continued trading nonstop.
"Damn it, it's gone up again!"
Tense and on edge, Na grimaced at the dollar-won rate flashing on his monitor.
He quickly pressed the receiver to his face and spoke fast.
"The rate jumped to 52.3, so we can't trade at the price you offered."
[1,552.3 won?! Why the hell is it so expensive?]
The client on the other end shouted in disbelief.
Na understood the customer's panic over the soaring rate, but the misplaced anger only fueled his own frustration.
Taking a deep breath to keep his temper in check, he asked again while holding the phone:
"If the upward trend continues through today, what would you like to do?"
[Ugh, this is driving me crazy.]
The client sighed, then responded with resignation:
[I need dollars urgently—go ahead and buy at that rate.]
"Please hold a moment."
Even as he spoke, Na quickly typed the order into his keyboard.
Once the trade confirmation popped up on his screen, he said shortly:
"It's done."
No sooner had he set down the phone than another call rang through just as urgently.
Na Woon-hak continued trading in a frenzy until the closing bell finally rang, bringing the hectic foreign exchange market to an end.
"Haaah."
Assistant Manager Na Woon-hak slumped into his chair like a wet rag.
He had yelled so much throughout the day that his throat was sore.
Picking up a mug, he sipped some water to soothe it, then glanced up at the USD-KRW exchange rate on the monitor and let out a low groan.
[USD/KRW: 1,597.31 (+32.02)]
A 32-won spike in a single day—it was no wonder he was drained.
"I thought things would get a bit better after the IMF negotiations. This is insane."
While he wore a tired, worried expression, a groan echoed from the seat next to him.
"Ugh. I'm crashing."
His junior colleague, trader Seol Kyung-sik, pulled a candy from a jar and popped it into his mouth, then offered one to Na Woon-hak as well.
"Want one, sun-bae?"
"Thanks."
As the sweet strawberry flavor spread in his mouth, he noticed Seol, tie long gone and one shirt button undone, muttering darkly.
"At this rate, it might break past 1,600 tomorrow."
Na Woon-hak gave the monitor a glance and replied in a low, heavy tone:
"Considering the continued weakness of the won in the offshore market… we'd better brace for that resistance line to break."
Apparently, Seol had thought the same, as he didn't look surprised—just sighed lightly.
"It must've been the delayed Yankee bond issuance by KDB in New York."
Na replied with a cynical edge in his voice.
"Calling it a 'delay' is generous—it was effectively canceled because no one wanted to buy the bonds."
"I heard they offered LIBOR plus 3 to 3.5 percentage points. If that's not selling, it's basically being treated like junk bonds."
As Seol's frustration flared, Na responded with a bitter expression.
"That's exactly what it is. If a state-run bank like KDB ends up like this, then it's basically impossible for other commercial banks or private companies to issue bonds and borrow foreign currency now."
Na bit down on the candy in his mouth with a crunch and gestured toward the monitor with his chin.
"And that is the result."
Seol, his face filled with worry, slumped his shoulders.
"What do you think will happen from here?"
"I don't know. But one thing's clear—the current situation is worse than it was before the IMF deal."
Seol Kyung-sik hesitated for a moment before cautiously asking,
"We're not… heading for a moratorium, are we?"
Assistant Manager Na Woon-hak didn't respond.
He simply closed his mouth, silent.
When no reassuring answer came to a question that had clearly been asked in hope, Seol's expression stiffened even more.
Just then, a trader across the room suddenly shouted.
"Whoa—Is that for real?!"
Startled, the trader leapt from his seat with the receiver still in hand and shouted loudly:
"Hansan Group just filed for court receivership!"
"What?!"
"Oh my god…"
"I had a bad feeling… and it actually happened."
The shock rippled instantly. People shook their heads and let out deep sighs and murmurs of disbelief.
It wasn't some small, obscure company. It was Hansan Group , a major conglomerate, ranked 12th in the corporate hierarchy and part of the powerful Hyunwoo (Hyundai) family. No wonder the entire trading floor was shaken.
As murmurs spread and the room buzzed, Na Woon-hak spoke grimly, his face tense.
"That confirms it."
"Confirms what?"
"That we're definitely going to break 1,600 won tomorrow."
"…Yeah. You're probably right."
Nodding with a weary look, Seol suddenly lifted his head as a thought struck him.
"Wait… wasn't our bank Hansan Group's main creditor?"
"…!"
Realization dawned, and Na Woon-hak's face twisted in an instant.
"Damn it. I thought the fire was in someone else's house—but it's in ours."
As the group's primary bank, it was crystal clear that the shock from Hansan's collapse would directly hit Korea Exchange Bank, too.
***
Late at night.
Breaking the stillness, a loud ringtone pierced the silence. Seok-won, lying alone on a spacious bed, stirred restlessly.
But as the phone kept ringing persistently, he eventually stretched out his arm while still lying down, fumbling across the nightstand until he managed to grab the phone.
"Mm… Hello?"
Still half-asleep and with his eyes closed, he answered the call. Landon's voice came through.
[Boss, it's me.]
Seok-won barely opened his eyes and checked the time displayed on the phone screen.
"What is it at this hour?"
[I'm sorry to disturb you while you were sleeping. I contacted you because there's urgent news.]
"Go ahead."
[Just a moment ago, Moody's downgraded South Korea's long-term credit rating from A3 to Baa2—two notches in one go.]
"…!"
The shocking news jolted Seok-won wide awake. He sat up abruptly.
"Is that true?"
[Yes, it is.]
"Mmm…"
Seok-won let out a low groan, his voice cracked with tension.
Previously, alongside S&P, Moody's had downgraded South Korea's credit outlook from stable to negative, and its short-term sovereign credit rating had also dropped from Prime-1 to -2.
However, the long-term sovereign rating had been maintained at A3 for 11 years, ever since Moody's began rating Korea in 1986.
Now, having it downgraded by two notches in one shot was nothing short of alarming.
Seok-won, now fully awake, wore a grave expression as he spoke.
"A downgrade in the long-term credit rating suggests they don't believe this currency crisis will end soon—it's going to drag on."
[That's correct.]
This was a grim signal that Korea's economy wasn't expected to recover any time soon, and was likely headed toward a prolonged slump. That made the situation even more dire than the earlier downgrade.
[On top of that, the credit ratings for 31 Korean institutions that issue foreign bonds—including Korea Development Bank—have also been downgraded in bulk.]
Hearing this, Seok-won furrowed his brow.
"That's practically telling investors not to touch Korean bonds—they're being treated like trash."
[It's not quite junk bond status yet, but with a Baa2 rating, issuing new bonds will definitely be difficult.]
"Not only new bonds. The prices of existing bonds are bound to plummet too."
[In fact, right after Moody's announcement, the yield on Korea Development Bank's 10-year bonds spiked by 950 basis points, showing clear signs of a massive sell-off.]
After hearing Landon's update, Seok-won clicked his tongue in frustration.
"950 basis points? That's a 200-point jump in one shot."
A rise in interest rates meant that the price of already-issued bonds had dropped by the same measure.
If it were just a temporary fluctuation, it wouldn't matter much.
But if this signaled a long-term weakening of Korean bonds, investors holding them would likely rush to sell before taking further losses.
A wave of panic selling like that would trigger a vicious cycle: rising interest rates again, driving bond prices further down.
[According to reliable sources, S&P is also preparing to downgrade South Korea's credit rating, following Moody's.]
"This is the worst-case scenario."
Seok-won frowned deeply in response.
Korea was barely holding on, and now the two major credit rating agencies had dealt it a one-two punch.
Quickly analyzing the situation in his head, Seok-won's eyes sharpened.
"If it's come to this, it's practically laying out a feast for anyone looking to strip Korea bare.
What are the hedge funds on Wall Street doing?"
[After the IMF support package was confirmed, the hedge funds that had pulled out and closed their positions are now selling off the won again after hearing the downgrade news. They've also begun shorting Korean bonds.]
Seok-won responded calmly, as if he had expected it.
"There's no way they'd pass up another chance to bleed Korea dry."
[Exactly.]
"Has Quantum Fund opened short positions too?"
[That one's still quiet for now.]
"It's strange. There's no way they'd just sit back and watch such a golden opportunity."
When he asked in puzzlement, Landon offered his thoughts.
[Southeast Asian countries like Malaysia, which were attacked by hedge funds earlier, have been pointing fingers at George Soros and the Quantum Fund, calling them the culprits behind the currency crisis. Maybe that's why they're laying low.]
Indeed, Prime Minister Syed Arif of Malaysia and George Soros had publicly exchanged sharp criticism in media interviews.
Other Southeast Asian leaders and high-ranking officials were also condemning George Soros through the press and at international forums.
"Knowing George Soros, he wouldn't be the least bit discouraged. He probably sees all the backlash as a badge of honor for making massive profits."
[That's true.]
If he could be rattled by criticism, he would never have earned the title of a Wall Street legend.
And since the time he took on the Bank of England, he had become quite used to this level of public condemnation.
"In any case, the Korean won is bound to spike again."
[It already has. In the New York forex market, it's broken past 1,600 won.]
With the exchange rate having already broken past its resistance level, Seok-won bit down hard on his lower lip.
"Keep a close eye on the Quantum Fund's movements and report back frequently."
[Understood.]
After ending the call, Seok-won got out of bed and walked to the kitchen. He opened the refrigerator and poured himself a glass of cold water.
"Phew."
After finishing the glass in one go, the thirst subsided and he felt his mind clearing up.
Grabbing a cup of coffee from the machine, Seok-won headed into the trading room and checked the Bloomberg terminal first.
Sure enough, it was flooded with articles and data about Moody's credit downgrade.
The only small relief was that South Korea wasn't the only country whose rating had been lowered—Thailand and Indonesia, which were also experiencing currency crises, had been downgraded as well.
"We may have avoided taking all the blows, but it doesn't change the fact that we're still prey for the hedge funds."
There were still hours to go before sunrise, but Seok-won was already wide awake.
With a grim expression, he scrolled through the incoming data on the Bloomberg terminal, closely monitoring the unfolding market situation.