SWNOVELXO 108
“We need to look for alternatives beyond the U.S.”
Yuseong Investment Securities had three teams managing wrap accounts.
This was because as soon as Sim Ju-won, who was in charge of the personal asset management division, was appointed as the new president, he significantly strengthened the personal asset management division.
Of course, there was also a corresponding market demand.
The more challenging the market became, the more investors preferred entrusting their investments to experts rather than buying and selling stocks directly.
“Are there any alternatives besides the U.S.?”
Among these, Wrap Account Team 1, to which Dokyung was newly assigned, was managing products for clients who had entrusted 20 million won or more.
It was the highest-value wrap account product created by Yuseong Investment Securities.
“When we suggest investing in the U.S., there’s a strong reluctance among clients.”
Regardless of how much money they’ve invested, clients showed equal interest in their accounts. However, there was a clear difference in their level of engagement.
They could have chosen to put their 20 million won in a bank account and receive fixed interest, but the fact that they invested in risky assets meant they were that much more interested.
“Hmm…”
Part Leader Seo Yong-won, hearing the employee’s report, fell into contemplation, resting his chin on his interlocked hands.
“Is there any suitable place? After all, if the U.S. is struggling, everywhere else is struggling too.”
“Our trading team thinks we should shift some of the assets invested in the U.S. towards European government bonds.”
The employee exchanging words with Part Leader Seo Yong-won was the manager leading the trading team.
“European government bonds?”
At Seo Yong-won’s question, the manager nodded.
“Yes, may I call in Assistant Manager Park Hyun-jae? He was the one who first brought this up…”
“Let’s do that. It seems right to discuss everything now.”
At Seo Yong-won’s words, the manager called his team member.
The summoned employee approached the two and bowed his head.
“Assistant Manager Park, let’s hear about the European government bonds.”
As the manager said this, Park Hyun-jae looked at Seo Yong-won and began to speak.
“Recently, European government bonds have been maintaining a more stable trend compared to U.S. government bond yields.”
Park Hyun-jae was a practitioner in the trading team. The trading team was responsible for directly managing the assets entrusted by clients.
In other words, since they were directly involved in buying and selling assets such as stocks and bonds on the front lines, their opinions were not taken lightly.
They were the team members who felt the market changes most acutely.
“Isn’t Europe affected by rising energy prices?”
At Part Leader Seo Yong-won’s question, Park Hyun-jae nodded.
“That’s true, but let me show you the trend of the UK’s 5-year government bonds.”
Saying this, Park Hyun-jae displayed a price chart of UK government bonds on the tablet PC he had prepared.
“The bond yield is maintaining around 2.0%.”
“That’s right. Even though the BOE (Bank of England) raised the base rate to 1.75% last August, the short-term government bond trend is still maintaining around 2.0%, indicating that the market views the UK favorably.”
“Is there a reason for this?”
Seo Yong-won asked, thinking there must be a reason for this trend to continue.
“The political season has returned.”
Park Hyun-jae answered Seo Yong-won’s question very simply.
And as if that answer explained everything, Seo Yong-won nodded.
“Expectations for the new Prime Minister, I see.”
“That’s right. There are expectations for the UK’s new Prime Minister. It means they’re hoping for policies to curb soaring energy prices.”
Politics and the asset market were inseparable.
Asset prices rose or fell depending on the policies of policymakers.
As Park Hyun-jae said, the UK was currently expecting the new Prime Minister to introduce policies to address the global economic recession.
Especially if policies to curb soaring energy prices were introduced, it was thought that the UK’s CPI (Consumer Price Index) would decrease in the next quarter.
“Currently, UK inflation is rising due to increases in food and beverage prices, along with energy costs.”
“The UK has a high proportion of electricity produced from natural gas.”
“That’s right. Setting aside food and beverages, the rise in energy prices is having a significant impact on the UK economy. Naturally, the new Prime Minister will introduce policies to address this, which suggests that inflation will decrease in the next quarter.”
This was the reason many experts were betting on UK government bonds, and why UK government bond yields were maintaining attractive levels amid global difficulties.
And this reason was an expectation within the bounds of common sense.
“How’s the volatility of the bonds? It seems best to think of bond diversification as a risk hedge.”
“Our trading team has looked at it from various angles, and we’ve concluded that investing in short-term bonds would be best to avoid such risks.”
Government-issued bonds included both short-term and long-term bonds.
The distinction was based on maturity. Bonds with maturities of 20 years or more were called long-term bonds, 5-10 years were medium-term bonds, and 1-3 years were short-term bonds.
Among these, long-term bonds carried the highest risk.
Naturally, the longer the maturity period, the greater the volatility. Even if lending the same amount of money, there was a difference in risk between receiving it back in 1 year versus 20 years.
It was uncertain whether this money would be received 20 years later.
As a result, long-term bonds also offered higher returns.
“If we add a small amount of risk-hedging assets to short-term bonds, I believe we can reassure clients amid the recent decline in portfolio returns.”
As Park Hyun-jae said this, Seo Yong-won nodded as if it wasn’t a bad idea.
“Then let’s look at the macro data.”
However, Seo Yong-won spoke to Park Hyun-jae as if suggesting they should still be cautious.
“We should enter now…”
“No. The macro data takes priority for now.”
Park Hyun-jae said a quick decision was needed, but Seo Yong-won spoke as if that was unacceptable.
“We’re managing client money. The failure of this investment doesn’t end with Assistant Manager Park Hyun-jae taking responsibility.”
In securities firms, there were trading departments that used the company’s capital. They bought stocks, bonds, and grew the company’s capital.
They received enormous bonuses for successful investments, and conversely, if they failed, all responsibility fell on the trader in question.
But the wrap account department was different.
It was a department that managed client money. The idea of bearing all the responsibility for failure alone was like a distant dream.
The company would suffer a decline in reputation, and clients would suffer asset losses.
It wasn’t just one person’s failure but could become everyone’s failure, which is why Seo Yong-won thought they should approach this carefully.
“…I understand.”
As Park Hyun-jae replied, Seo Yong-won nodded and called Hong Se-jun, who was at one side of the office.
“Part Leader, you called?”
Hong Se-jun approached, greeted Seo Yong-won, and also slightly bowed his head to the trading team members standing nearby.
“The trading team’s opinion is that they want to invest in UK bonds. Can we have the macro data by the morning after tomorrow?”
At Seo Yong-won’s question, Hong Se-jun thought for a moment and then nodded.
“Yoon Dokyung-ssi is in charge of Europe. On the morning after tomorrow, Yoon Dokyung-ssi will present…”
“Assistant Manager Hong, please do it yourself.”
Park Hyun-jae interrupted Hong Se-jun’s words, and everyone looked at him.
“Yoon Dokyung-ssi has only been on the team for a day, what would he know? Assistant Manager Hong should…”
“No, Assistant Manager Park. We’ve already decided on this.”
Hong Se-jun replied firmly, as if this was their business.
“No, Assistant Manager Hong. Yoon Dokyung was a PB working at the PB center until two days ago. What would he know about handling macro data?”
Seemingly unsatisfied with Hong Se-jun’s answer, Park Hyun-jae spoke informally to Hong Se-jun, as if forgetting they were in front of the Part Leader.
“I, who have been here longer, made that judgment. This is Yoon Dokyung-ssi’s job.”
However, Hong Se-jun spoke as if telling him not to interfere.
“Right now, the client’s money…”
“Enough.”
As Park Hyun-jae tried to object once more, Part Leader Seo Yong-won raised his hand to stop him. Then he looked at Hong Se-jun.
“Fine. Do as Assistant Manager Hong has judged.”
“Yes, understood. I’ll take my leave.”
Hong Se-jun bowed and returned to his seat.
“Let’s trust Assistant Manager Hong’s judgment.”
As Part Leader Seo Yong-won said this, Park Hyun-jae sighed and nodded.
“Understood.”
“Then Assistant Manager Park, you may go too.”
As Seo Yong-won said this, Park Hyun-jae bowed and turned around.
As he returned to his seat, Park Hyun-jae’s cold gaze was directed towards Dokyung and Hong Se-jun at one side of the office.
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“…It seems we’ll be investing in UK bonds. Can you present by the morning after tomorrow?”
Meanwhile, Dokyung, who was sitting at his desk working, nodded at the words of his mentor, Hong Se-jun.
“I’m actually looking into the UK right now. I’ll prepare a draft and show you tomorrow.”
“Good. Thanks for your hard work.”
As Hong Se-jun said this, Dokyung smiled slightly, bowed his head in greeting, and then looked at his monitor.
The smile had already disappeared from Dokyung’s face as he gazed at the monitor.
‘In the end, all directions point to the UK.’
Last night, the Message had talked about the UK. As always, it wasn’t a coincidence that it had pointed towards the UK.
When he started investigating the UK afterwards, there were still two coexisting perspectives.
The UK that had become an ‘unstable link’ as the Message had said.
And the image of the UK as a ‘financial powerhouse’ that still exerted enormous influence in the financial world.
‘There’s no middle ground.’
The evaluations were divided into two extremes, and Dokyung had to judge which side, the optimistic or pessimistic view of the UK, more accurately described the current situation in the UK.
Sighing, Dokyung began to search for materials about the UK.
‘The UK has become an unstable link due to rising energy prices.’
The rise in energy prices in the UK was not something that could be simply ignored.
After the war, the inflation rates of other European countries were at most 6-7%, no matter how high.
However, the UK’s inflation rate was approaching 10%.
‘This means that the rise in natural gas prices is being passed on to other sectors.’
More than half of the UK’s electricity production came from natural gas. As a result, generation costs were rising, electricity bills were increasing, and this was affecting other industries.
‘This has started to create a gap between nominal wages and real wages.’
Naturally, generation costs were being passed on to various sectors, and of course, the burden on ordinary citizens paying electricity bills was also increasing.
The current situation in the UK was that if you received a monthly salary (nominal wage) of 2 million won, after paying for electricity, gas, fuel, and so on, the money left over (real wage) was less than 500,000 won.
‘This kind of contraction in consumption is…’
This was different from countries like the U.S. raising benchmark interest rates to reduce the money circulating in the market and thereby suppressing consumption.
In the above case, consumption decreases and instead, money is used for bank savings or paying off debts, but in the UK’s situation, consumption was contracting because there was simply no money to spend.
‘A time bomb…’
The current situation was literally no different from a time bomb that could explode at any moment. The problem was that when this bomb explodes, no one could guarantee how far the aftermath would reach.
The entire world could be affected by this bomb.
‘There’s still a turn left, so I hope my outlook is wrong.’
The UK had a new Prime Minister’s cabinet in place. Hoping that the new government’s policies would have a positive impact as everyone expected, Dokyung began to write the first sentence of his report.