DR Olarn Chaipravat, president of Siam Commercial Bank, can't wait to get sweet revenge on the hedge funds which are now in trouble.

Since the collapse of the Russian rouble in September this year, the hedge funds -- mostly US investment vehicles which make directional bets on global stocks, bonds and currencies -- have witnessed a dramatic change in their fortunes.

Their nervous banks are recalling margins from them, forcing the hedge funds to liquidate their positions, mostly short positions against the yen, the regional currencies and stocks. For this reason, Olarn says foreign analysts, with links to the hedge funds and their banks have been trying to talk Thailand and the region down to delay their recovery. The quicker the regional markets recover, the costlier the hedge funds' liquidation will be, he argues.

The hedge funds are still holding positions against the yen and other regional currencies and stocks, and they need the market to go the other direction to stem the damage. Does it sound like a conspiracy again?

Still, after the downfall of Long-Term Capital Management, the high-profile US hedge fund, the world is shocked to have learnt that behind the masks of the hedge funds are the US banks themselves. LTCM, which had only US$4 billion in capital, was showered with loans from US banks and a handful of European banks so that it could leverage its bets in the global financial markets by 25-30 times.

So when the rouble turmoil erupted, LTCM lost money and the ensuing liquidity crisis meant that it would have to liquidate its massive positions to meet the margin calls. This ''fire sale'' prospect forced the Federal Bank of New York to step in and let the crony friends of LTCM, who were the major US banks, to bail out the hedge fund.

Fear of the credit crunch and the US economic recession have forced the US Fed to take prompt action by cutting interest rates twice within 15 days.

In the emerging-market financial crisis, the hedge funds went through a triumph and tragedy. There are around 4,000 hedge funds which have combined assets of about US$300 billion (however, not all of them are notoriously leveraged). The hedge funds enjoyed their triumph between the whole year of 1997 and up until August this year. The hedge funds bet about US$30 billion against the baht in 1997 and succeeded in breaking apart the Thai currency peg system. On just one day alone -- May 14, 1997 -- the hedge funds assaulted the baht with US$10 billion from their war-chests.

In 1997 Olarn stood firm that the baht should not be devalued for it would not alter the Thai economic fundamentals and neither would the devaluation boost exports. When the baht was floated on July 2nd, his reputation was immensely damaged. His Siam Commercial Bank was also heading toward financial problems.

After making great profits with the baht's devaluation, the hedge funds went on to attack other regional currencies. Since Thailand shared a similar trade pattern and had been undergoing economic integration with the neighbouring countries, it was easy for the hedge funds to see that the regional currencies must devalue to remain competitive. The rupiah, the ringgit, the peso, and to a less extent the Singapore dollar, were also badly bruised in the currency battles and all witnessed sharp depreciations.

This year the hedge-funds' attacks quickly expanded to the Hong Kong dollar and the Japanese yen, with rumours and market talk swirling around that the dollar peg would succumbed to the pressure and the yen could collapse to YEN 160 or YEN 200 to the US dollar due to Japan's unwillingness to deal with its banking crisis. The Hong Kong authorities ended up spending US$12 billion from their US$90 billion foreign exchange reserves to defend the dollar peg by buying up the Hong Kong blue-chip stocks and the contracts of the futures index and relieving the pressure of high interest rates.

In August the yen dipped to YEN 147 to the US dollar, raising fears that its slide would trigger the second wave of the Asia crisis. The situation quickly changed in September when Russia defaulted on its foreign debts and announced a debt moratorium.

A George Soros fund lost US$2 billion in Russia alone. The hedge funds began to reel, losing their investments in Russian high-risk global bonds and the rouble itself. The Russian commercial banks, which were the counterparties of the hedge funds, simply did not honour the currency contracts, under which the hedge funds shorted the rouble for the US dollar.

The hedge funds' mistake was that they thought they were dealing with another Bank of Thailand, which was forced to secure the IMF package and honour all currency obligations with them. Obviously, the Russians have their own way of doing business.

That triggered the liquidity crisis, forcing the hedge funds to unwind their positions, particularly the emerging-market positions. That was the reason why the yen soared YEN 20 against the dollar in three days in early October. Now the yen is trading at YEN 115, with some Japanese analysts believing it could go to below YEN 100 if the plight of the hedge funds is worse than most people expect.

Julian Robertson's Tiger funds, which once attacked the baht with a war chest of US$3 billion, lost US$3.4 billion in October this year on top of a US$2.1 billion loss in September. The Tiger funds, which are not roaring as in the past, are now worth US$17 billion.

Olarn says the cost in leveraging the attacks against exotic currencies is now prohibitive, making it much easier to rebuild battered economies.

If Malaysia had waited a little bit longer, it would not have had to impose draconian capital controls to fend off speculative attacks on the ringgit because the hedge funds were making a big retreat from the emerging markets. But since a big factor of the government's reason to impose the capital control was political, the measure sounded less convincing.