NOVEL NEXT 90
A drizzly morning in Teheran Valley.
Whether due to the rain or because it wasn’t yet rush hour, a single car entered the underground parking lot of a building, piercing through the darkness as black as midnight.
“Phew. It’s raining cats and dogs.”
The protagonist who got out of the car with a sigh after finding a suitable parking spot was Dokyung.
Usually, he was supposed to arrive by 8 AM, but today he came to work at 6:30 AM, earlier than usual.
“Yoon Dokyung-ssi.”
As Dokyung entered the building and was waiting for the elevator, he turned his head to look to the side at the sound of someone calling his name.
“Center Director.”
The owner of the voice calling Dokyung was Ha Min-jae, the Center Director of Yuseong Investment Securities’ Leaders Center. Dokyung looked at him with a surprised expression before quickly bowing his head.
“You’re here early.”
“Yes, today there’s an urgent…”
“Is it because of BBB?”
Dokyung nodded at Ha Min-jae’s question.
Ding-
As the elevator arrived and the doors opened, the two stepped inside.
“I came early because of that too. On my way, I noticed lights were on in the centers of other securities firms like Taesan and Seonjin.”
Dokyung nodded and looked at Ha Min-jae as he spoke.
“I have many clients who invest in the U.S., so it makes sense for me to come early, but what about you? I thought you mostly managed clients investing in the domestic market.”
“Ah, I recently…”
“Hi-On?”
Ha Min-jae asked as if he knew about all the recent events. Well, given how noisy it had been, there was no way he wouldn’t know.
“Yes. Hi-On seems like it will be greatly affected by this bill, so I’m planning to write a report early and send it to clients.”
“Do you need to write a new one?”
“No, I prepared a bit at home.”
“Then you must have some time.”
“That’s right.”
“Good. Let’s go to my office.”
As the elevator arrived at the floor where the center was located, Ha Min-jae said this and headed to his office, with Dokyung following behind.
“Could I get a briefing on that material as well?”
“Of course.”
Ha Min-jae hung his jacket on a coat rack and pointed to the center of the Center Director’s office, and Dokyung sat down first, taking out his laptop and opening the material he had prepared at home yesterday.
“Let’s begin.”
At Ha Min-jae’s words, Dokyung began speaking as he flipped through the screens.
“BBB, or the Build Back Better plan, is an economic policy being pushed by the U.S. government, as you know, Center Director-nim.”
“The Build Back Better Act.”
“Yes, that’s right. There were three main plans divided within it. The ARP, a $1.9 trillion (about 2,300 trillion won) economic stimulus law, and the AJP, known as the infrastructure bill or the American Jobs Plan, have already passed last year.”
“That’s right.”
“However, one bill, the AFP (American Families Plan), has been unable to pass the U.S. Senate as inflation suddenly hit.”
Center Director Ha Min-jae began to focus quietly on Dokyung’s words.
“The reason was the content of the AFP. It was a massive spending plan that included investments in the public education system, expansion of childcare subsidies and other social welfare spending, as well as investments in renewable energy to address the climate crisis, and investments in transportation, industry, and agriculture sectors.”
“The scale was reduced, wasn’t it?”
“Yes. When the bill was first prepared, it was a plan to invest $3.5 trillion, about 4,000 trillion won. But it was reduced to $1.75 trillion (about 2,500 trillion won).”
“Yet it still didn’t pass because…”
“A U.S. ruling party senator opposed it.”
The United States has a bicameral system with the House of Representatives and the Senate.
It was easy to pass bills in the House because the ruling party that produced the president held a majority, but bills passed in the House had to pass the Senate once again.
The Senate composition was 48 seats for the ruling Democratic Party, 50 for the Republican Party, and 2 independents. Considering that the independent senators typically acted with the ruling Democratic Party, it was effectively 50-50.
In other words, if even one person from the ruling party opposed this bill, it couldn’t pass.
“One senator from the ruling party expressed opposition, saying that if this bill passed, it could lead to tremendous inflation once again due to money flooding the market. In fact, as he said…”
“Massive price increases hit the U.S. and the world.”
“That’s right. In retrospect, he was correct, but the U.S. government has consistently said that they need to pass this bill for their economic policies to function properly.”
“So they changed the law.”
Dokyung nodded at Ha Min-jae’s words and continued.
“So the government modified the bill’s content to the IRA (Inflation Reduction Act of 2022) and drastically cut the budget compared to before, in line with the intention to reduce government spending.”
As the name of the bill suggests, the law was significantly modified to focus more on reclaiming money that had been released into the market rather than budget expenditures.
This was because reclaiming money from the market would help reduce inflation.
“The U.S. President and even the senator who had opposed the bill until the end agreed to this modified version.”
“But they flipped the story once again, didn’t they?”
“Yes. As you said, Center Director, the ruling party senator who had agreed to the bill once again stormed out of the negotiation room and opposed it.”
“The reason…”
“Detailed information hasn’t been released. It’s just known that he laid out his demands and then refused to negotiate.”
The market viewed that this bill would no longer pass.
This was because the ruling party senator’s overturning of the negotiations was exactly the same as last time.
“Even among the ruling party supporters, it was accepted as a fait accompli that this bill had been torpedoed, and the market felt the same way.”
“But yesterday…”
“Yes. Last night in our time, reports came out that the opposing senator had expressed his support for the bill and that it would soon be submitted to the House, and this has been confirmed.”
It was an event that completely turned the market atmosphere around. The agreement announced when everyone had accepted the bill’s failure as a fait accompli heated up the U.S. market the previous night in Korean time.
“And barring any unforeseen circumstances, it seems this bill will pass in a week.”
If all members of the ruling party agreed and all members of the opposition party opposed, it would be a 50-50 tie in the Senate.
At this point, if the Vice President of the United States, who also serves as the President of the Senate, used their casting vote, the bill could pass with 51 to 50.
“Accordingly, it seems that several companies in our market will be affected.”
“Yes, solar power generation companies seem to be receiving enormous benefits.”
This was the reason Dokyung came to work early this morning.
While domestic welfare policies might have little impact on Korea, the support measures used for the most important climate change response policies could have a significant impact on domestic industries.
“For example?”
“Han Solar Energy and Hi-On, which have production plants in the U.S.”
Ha Min-jae nodded with a smile at Dokyung’s words, and Dokyung continued his explanation.
“In this support measure, $30 billion (about 40 trillion won) is allocated to the solar sector. It’s structured around providing tax benefits to solar power generation manufacturers.”
“Han Solar Energy has a factory operating in the U.S., right?”
“Yes. It’s estimated that they could receive tax deductions of about 280 billion won annually for producing and selling products within the U.S.”
“Then for Hi-On…”
Hi-On was a company that had become embroiled in the fight between Yuseong and Seonjin.
“Hi-On’s factory in the U.S. will start operating from next year. We’ll need to calculate, but it seems the tax credit benefits for products produced in the U.S. factory will be substantial.”
“That’s good. You recommended buying more yesterday, didn’t you?”
Dokyung had just appeared on the YouTube channel again yesterday, saying that now, as the solar sector was falling, was the opportunity to buy Hi-On.
However, he couldn’t have imagined that such good news would fly in from the U.S. before even a day had passed.
“Yes. I saw that the stock price would not only recover but rise even higher than it is now if we waited.”
“What you saw has been proven right in just a day, Dokyung-ssi.”
The stock price had fallen as solar power generation support was reduced in the domestic renewable energy support measures.
However, Hi-On was generating most of its sales not in the domestic market but overseas. On top of that, a bill was about to pass in the U.S., its main sales country, giving tax benefits to solar power generation equipment and component manufacturers.
“When I look at junior PBs, I often see them unable to endure at times like this and break their opinions. But Dokyung-ssi didn’t break his opinion.”
“I saw it as a good company.”
“Well done. Sometimes the market ruthlessly refuses to move according to our vision. But that’s precisely when we must not waver.”
Ha Min-jae was praising Dokyung based on his own experience.
“If I waver, the clients who invested based on my words will waver even more. We shouldn’t recommend easily in the first place, and if we recommended after careful consideration, we should respond strongly for the sake of the clients who followed that decision.”
Ha Min-jae nodded with a smile.
“Dokyung-ssi has once again shown everyone that he is an outstanding person.”
“You’re too kind.”
“I’ll stop the praise here for now. I think there will be more opportunities to praise you later. Shall we continue listening? On the flip side, there are places where the situation hasn’t improved, right?”
Ha Min-jae opened his mouth towards Dokyung, as if there was something more, promising for later.
“First, car companies have gotten into trouble.”
“That’s right. The bill includes content about electric vehicle support.”
Dokyung quickly flipped through the screens and continued his briefing.
“The electric vehicle support content includes a provision that ‘purchase subsidies will only be provided for electric vehicles produced in the United States.'”
All electric vehicles produced by domestic car companies were cars produced in Korea.
Of course, they had production plants in the U.S. as well, but there were no production lines for electric vehicles at all.
On the surface, it was a bill to support electric vehicles to reduce greenhouse gases, but in reality, it was a bill that contained the will to protect the electric vehicle industry produced within the United States.
In other words, in line with recent international trends, the U.S. continued the flow of deglobalization.
“And in this bill…”
“Since it’s a renewable energy support measure, there must be content related to secondary batteries, right?”
“Yes, that’s right. It also placed major restrictions on industries related to secondary batteries, or batteries.”
In addition to giving support only for electric vehicles assembled in the U.S., the bill also placed major restrictions on batteries, the core component of electric vehicles.
“It states that batteries must be equipped with materials imported only from the U.S. or countries that have signed an FTA (Free Trade Agreement) with the U.S.”
Dokyung pointed to the screen.
“It means to make batteries using only core battery materials like lithium, graphite, and cobalt from countries friendly to the U.S.”
“Don’t most domestic battery companies use Chinese raw materials?”
“Yes. We’ll need to calculate, but over 80% import raw materials from China to produce batteries.”
Most domestic secondary battery production companies were building new factories in the U.S. Therefore, it seemed they wouldn’t be affected by the bill, but there was a new obstacle.
It was the issue of raw material procurement.
China had a tight grip on most of the raw material market for battery production. Because most were dependent on China, there seemed to be raw material supply issues ahead.
“Most companies are operating battery production plants in the U.S. or are currently building factories, so they are likely to benefit from the support measures soon. However, some companies import 100% of their raw materials from China.”
“Then raw material supply issues will arise.”
If supply chain bottlenecks occur due to inability to procure raw materials, production costs will naturally rise.
There were domestic companies where these issues would become major problems.
“Then which company will be most negatively affected by this bill?”
At Ha Min-jae’s question, Dokyung sighed and opened his mouth.
“Mirae Chemical.”