The risk management meeting held the following day.
At the meeting, personally presided over by the division head, not even the sound of breathing could be heard.
The election risk originating from the United States was nothing in comparison. With a sudden, massive vacuum in state administration, every ministry in the executive branch had gone into emergency mode, and because of the resulting uncertainty, the KOSPI was headed for the abyss.
“Manager Oh, where is the KOSPI right now?”
“...It’s fallen below the 2,400 line. It closed yesterday at 2,380 points.”
“Damn it. We’re back to prices from ten years ago. What are the chances it goes up from here?”
“...In this state, it’s impossible. The political world is still sharply divided over this incident. At the very least, the risk fallout will continue until an election date is set.”
At present, the political world had failed to find any point of agreement. To me, it felt like the game was already over, yet for some strange reason, the ruling and opposition parties could not find common ground.
“No, the matter’s already settled, isn’t it? The ruling party should step up and clean this up! Do they really want to see the KOSPI hit 2,000?”
Director Choi, who rarely revealed his emotions, even slammed the desk as he shouted.
It was understandable. That one incident alone had turned the Korean stock market into utter chaos. The exchange rate, already unstable, had broken through 1,350 won due to risks at home and abroad, and was now looking toward 1,400.
A rise in the exchange rate also meant a rise in prices. If this trend continued, the domestic consumption index would clearly be smashed, and there was no telling how the resulting recession would tear through our stock market.
For that reason, Bank of Korea Governor Shin had been tearfully pleading with the political world every day to make a decision for the greater good. But the ruling party lawmakers would not budge.
“What are the current trading trends on the KOSPI?”
“...Foreigners and institutions are dumping. Only retail investors are buying. Most are speculating that the exchange rate keeps rising because foreigners are disposing of won.”
Everyone’s faces darkened.
Foreigners simply selling was one thing; completing currency conversion on top of that was an entirely different problem. Even if the current uncertainty in the market were resolved, there was a high chance they would not return.
“When is the plenary session?”
“This Friday. On Friday, there needs to be approval from more than 200 seats for both the post-incident cleanup and the confirmation of the presidential election date to be resolved. However...”
“However?”
“Governor Shin has made a request of us.”
“The Bank of Korea has? What request?”
“He asked us to activate the market stabilization fund...”
The market stabilization fund was an unprecedented card activated when a sudden shock struck the domestic stock market. In truth, Korea’s foreign exchange reserves did not consist solely of the Bank of Korea piling up dollars; they also included indirect holdings through the pension fund’s possession of American assets.
In other words.
“You’re saying they want us to sell the Nasdaq and buy the KOSPI?”
They were asking us to help put out the fire.
“Yes...”
The division head looked at the KOSPI, which had fallen to 2,360, then turned his head.
“Good. Now let’s speak frankly. What do the people in charge think?”
No sooner had he finished speaking than Department Head Choi of the overseas team, a safety-first man to the bone, shot his hand up.
“That’s absurd, sir! Isn’t the pension fund about ‘returns over national interest’? None of the risks have been resolved yet. How can we use the people’s retirement money to put out a fire?”
-I’m of the same opinion as the department head. The political world needs to reduce some of the risk before we can invest.
-Leaving everything else aside, the Nasdaq is currently the pension fund’s biggest source of returns. With uncertainty over the U.S. election being resolved, it keeps rising. Selling that off and buying the KOSPI has far too high an opportunity cost.
No one was in favor. And understandably so—the Nasdaq was far too hot.
Before the U.S. presidential election began, the Nasdaq had been moving sideways around 17,000, but recently it had broken through 19,000 points. People had even begun saying that if you couldn’t make money in the U.S. market, you were an idiot.
“Good... Then is there anyone in favor of the market stabilization fund?”
Amid everyone’s silence, I once again raised my hand alone and lonely.
“I don’t think the Bank of Korea’s proposal is bad. I would like us to activate the market stabilization fund.”
-Hey, hey, Team Leader Lee. Why are you so emotional today? The Nasdaq is at its highest point right now. To put it bluntly, you can buy anything in the S&P 200 and it’ll go up. The opportunity cost of giving that up to put out the domestic market fire is too high.
“It’s because it’s at its highest point that we should sell. Conversely, the domestic stock market is severely undervalued.”
-No, this isn’t the time to aim for a technical rebound... Even before this incident, the KOSPI was weak. And now something like this has happened too. How is it supposed to rebound?
“The recently announced corporate earnings are not bad enough to warrant this level. It’s clearly undervalued.”
-With the exchange rate in that state, do you think those earnings will continue to hold? In my view, we shouldn’t even glance at the KOSPI for a while.
“I didn’t expect a situation like this either... But even so, Korea isn’t that much of a basket-case country. The political problem will definitely be resolved.”
I spoke with emphasis.
“I’m also speaking strictly from a returns perspective, not national interest. I think it would be better to dispose of Nasdaq assets and purchase domestic stocks.”
I knew very well why the reactions of our managers were so lukewarm.
The KOSPI had actually peaked during COVID, and since then, like some lost N years, it had remained sluggish. Far below its previous high of 3,200, it fought a lonely battle every day over whether it would be 2,300, 2,400, or 2,500.
With such an unpromising KOSPI, and now an unexpected incident like that on top of it... even the Korean pension fund would want to run away from the domestic market.
“Fine. If we do it, how much?”
the division head asked.
“At least in the range of 10 to 20 trillion won.”
“That much...?”
“It is clearly undervalued. Looking at comprehensive indicators such as the semiconductor cycle, I believe the fair value of the domestic stock market is at least 3,000.”
No sooner had I finished than everyone sighed.
A KOSPI of 3,000 meant it would rise at least 600 points from where it was now. In percentage terms, that meant a 30% increase... but no one seemed to trust our KOSPI.
“What do the others think?”
But when the division head asked again, no one raised an objection. No matter how free a forum for debate it was, individual performance records could never be ignored.
Just then, Manager Oh stepped in to provide supporting fire.
“Sir. To be honest, I also agree with the opinion that the KOSPI is undervalued. Looking at the companies’ earnings reports, it shouldn’t be this bad, yet it’s been far too weak for no clear reason. Of course, the criticism that there’s no next-generation growth engine... has some merit, but still, this is too harsh.”
“Manager Oh, you’re in favor too?”
“The market stabilization fund the Bank of Korea wants isn’t that large a sum compared to our profits from last year. I don’t think it’s a bad idea.”
The division head asked again.
“Does anyone truly have a different opinion?”
*
“You’re causing another big incident for the first time in a while.”
After the risk meeting ended, Manager Oh approached me.
I smiled.
“Thank you for helping me, sir.”
“Helping, my foot. This time, I simply happened to think the same way. No matter how hopeless politics may be, Korea shouldn’t be that backward of a country. Well... even if it isn’t this week, shouldn’t the ruling and opposition parties reach an agreement by next week?”
He said that, but he did not seem to trust the political world very much.
“Anyway, if we’re going to create a market stabilization fund, we have to sell U.S. assets... What are we supposed to sell?”
Manager Oh smiled bitterly.
The U.S. market was good. Far too good.
People were even saying that if you bought the S&P 200, money duplicated itself, and it was not an exaggeration at all. It was an era of super-boom where anything you bought went up.
“How much do we have in cash-equivalent assets?”
“Almost none. It’s no exaggeration to say the global stock market these days is in a condition that may come once in a hundred years, isn’t it? Most of it has been allocated to bonds and equities. European stocks have also soared, so next year’s performance will likely hit another record high.”
“Then we have no choice but to sell.”
“Right. What we sell is what matters. Do you have a portfolio in mind?”
After a brief pause, I spoke to him.
“Sir. Do you remember what I told you before?”
“What?”
“My prediction for the U.S. election. You said that if Baidon withdrew midway and Donald was elected, you’d listen carefully to one request from me.”
“...You punk, the election isn’t over yet. Looking at U.S. polls, Kamila seems to have the advantage. What are you trying to say now?”
“Let’s sell Big Tech. Around 100 trillion won, in stages.”
“Wh-what?”
Manager Oh’s pupils instantly widened.
“Ah, I’m not saying we should dispose of 100 trillion won in assets and use all of it for the market stabilization fund. I think about 10% would be enough to prop up the KOSPI.”
“You bastard, do you think I’m surprised about the market stabilization fund right now? Why would we dispose of as much as 100 trillion won in Big Tech? In the pension fund’s portfolio right now, they’re the ones earning us the most money.”
“Exactly. I think they’ve risen too much, so it would be better to hold cash for a while.”
“Hey, Team Leader Lee.”
Manager Oh’s voice grew louder.
“You’re the one who bought Big Tech the most aggressively in our company. You’re also the one who rated their technological capabilities the highest. And a month ago, you even submitted a report to me saying that the Fourth Industrial Revolution inevitably has to be an era of AI, electric vehicles, semiconductors, alternative energy, and platforms, and that the United States has those technologies firmly in its grasp.”
“My view on that hasn’t changed. The United States will also lead the Fourth Industrial Revolution smoothly.”
“Then why? If what you say is true, American technology is already in a state of ‘super-gap.’ Like Microsoft, today is always the cheapest price.”
If one were to pick the stock that had risen in the most exemplary way in the U.S. market over the past thirty years, it would undoubtedly be MS.
After the dot-com crash, MS stock had continued to trend upward like a pyramid scheme. Of course, its price had fallen during events such as COVID and the Ukraine-Russia war... but put another way, unless the disaster was on that level, there had never been a time when it did not rise.
The secret was, of course, Bill’s staunch pioneering spirit and innovative Windows updates... not that, but its solid market monopoly position. It had created a market ecosystem where competitors could not emerge, so its stock price had no choice but to rise.
Seen in that sense, selling Big Tech now could only be called a foolish move.
Their AI technology, semiconductor technology, platform dominance, and so on had created a gap from which competitors could not emerge, as solid as MS’s market monopoly.
“If the only reason to sell is ‘because it’s gone up a lot,’ that’s an extremely foolish decision. It’s like selling MS stock in 2015.”
“Sir. You told me to avoid a passing shower.”
“...What?”
“No matter how I look at it, something is off about the U.S. presidential election. They’re making noise about Kamila being on the rise, but if you look into the data, she’s simply become more popular in Democratic strongholds. There’s barely any movement in the swing states.”
“...Do you really think Donald will do ‘that’?”
“Yes. He will. He’ll try it once. There are nothing but yes-men around him.”
“Haa...”
“Please sell 100 trillion won’s worth of Nasdaq assets in stages and use part of that money for the market stabilization fund.”
Manager Oh looked as though he was about to say something, then turned his head.
“Damn it. Then we sell Nasdaq, create the market stabilization fund, and where do we use the remaining money? Keep it in cash?”
“...Sir.”
After hesitating for a moment, I said something I knew I could not avoid being cursed for.
“Could you invest in ventures? In domestic ventures.”