106M 1997 Asian Financial Crisis
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Transcript of 106M 1997 Asian Financial Crisis
1997 Asian Financial Crisis
Pad Thai Hedge FundCase: Thailand
Raj Kavadi, Alberto Aular, Gary Vartanian, Haiwei Cao, Arjun Banerjee, David Song
Presentation Date: 11/01/1996
Analyzing the growth- Avg 8% GDP growth
- $14.329 Bill Inflow- ↑100% from 1993
- Stock market ↑175% since 93’
- Property Sector ↑395% from 93’
- Exports: ↑100% since 93’
- Rating: Moody (AAA) & SP (A)
BUT…...- Bank Lending as % in GDP 58%- Investment as % of GDP:
- 26% → 41%
Qualitative Research
Source: World Bank
Source: World Bank
Main Qualitative Findings ⇒ Quantitative Findings●Money in circulation →
Huge Inflation
●Market Swimming with Bad loans
●Everything Overvalued!!
●Downward Pressure on E
●Real GDP increase (I) is false
●Held by incoming foreign credit and fixed exchange rate
Quantitative Research
(X-M) + (FB-FL) + (CB buy ฿ , sell $ - CB sell ฿, buy $) = 0
CA + KA + ORT = 0
Predictions
●QTM & PPP ⇒ Depreciation
●BOP ⇒ Depreciation
●Expect Depreciation…
●INSTEAD GET LOSS IN RESERVES
------ NOT SUSTAINABLE --------
Action Plan Within a YEAR!!!!When Run out?
●1 day?
●1 month?
●1 year?
●5 years?
2 Billion Baht
20 Billion Baht
18 Billion leverage
18 Billion Baht 2 Billion Baht
720 Million USD
Shorting on Real estate and financial services equity
3 Billion Baht
Eh/f = 25 Baht per $
Asset Allocation:
720 Million USD
400 Million USD 160 Million USD
CDS in Mortgages and Thai Government bonds
600 Million USD
160 Million USD
160 Million USD 162 Million USD
922 Million USD 46.1 Billion Thai BahtEh/f = 50 Baht per $
922 Million USD 27.6 Billion Thai BahtEh/f = 30 Baht per $
27.6 Billion Thai Baht- (18 Billion Thai Baht) - (10% Interest)_____ 7 Billion Thai Baht+ 3 Billion From Shorting10 Billion Thai Baht!!!!!
Gross Profit
10. Billion Thai Baht 2 Billion Equity
5+ FOLD RETURN !!!!!
Return
Bhat per $ Profit (Billions of Baht)
Return (Fold Amount)
30 10.66 5.33
40 19.88 9.94
45 24.49 12.245
50 29.1 14.55
Credibility:300% return
George Soros
Past Precedent
Thank you!