"I knew it, all the declines are just a lure for shorts."
Seeing the British pound exchange rate quickly recover to the 1.5350 mark and continue to break upwards, inside the trading room of Tianhe Capital Company in Hong Kong City, Gu Chijiang, who had been tense for most of the day, finally slowly relaxed his expression and continued with a smile:
"The power of market trends is extremely strong. With the Bank of England conducting open market operations and the Federal Reserve's interest rate hike expectations delayed, the British pound's exchange rate has only one path, and that is to continue upwards.
In the face of the power of the trend… No matter how the main short institutions in the market counterattack, it should be impossible to change the direction of the British pound exchange rate market.
I really don't understand, why would 'Huayin International' enter the market to go long at this time, supporting 'Huayi Capital', when the exchange rate trend is clearly upward?"
"I heard it's because of the Fang family,"
Xie Hongxing, the trading team manager of Tianhe Capital, responded amidst Gu Chijiang's lament.
"Two days ago, I heard that Mr. Zhang Yanshun, General Manager of Asset Management at 'Huayin International', met privately with CEO Su of 'Huayi Capital', but no one knows what they discussed."
"Is that true?"
Gu Chijiang asked in surprise.
Xie Hongxing nodded and said,
"Many people saw it at the entrance of 'Tianlai Hotel' that day. It seems Ms. Li of the Huo family was also present."
Gu Chijiang said with a smile,
"That explains it. I was wondering why 'Huayin International', a state-owned institution, would suddenly intervene in the British pound exchange rate market like this. So it turns out people from the Fang family and Huo family are pushing this behind the scenes. This Mr. Su from 'Huayi Capital' has considerable influence."
Xie Hongxing said,
"Indeed. To be able to get an institution like 'Huayin International' to step in and save them, it's truly remarkable."
Gu Chijiang nodded slightly and added,
"It seems the Fang family is really putting all their eggs in the basket of this young man named Su. This is truly a huge gamble!"
Xie Hongxing responded,
"Exactly. However, at this moment, the long forces in the British pound exchange rate market still hold an absolute overwhelming advantage, and the group of short-term short position holders who have suffered severe losses in the market, with the British pound exchange rate rising again and the trend becoming clearer, will certainly continue to stop loss and close their positions.
This means… in the foreseeable future, the British pound exchange rate will continue to strengthen. In a situation where longs are completely suppressing and short forces are gradually collapsing.
It feels like even if 'Huayin International' invests a large amount of capital to short and provides 'Huayi Capital' with a new credit line to prevent 'Huayi Capital' from being margin called, it probably won't be able to reverse the future trend of the British pound exchange rate in the market."
Gu Chijiang said,
"That is beyond doubt. Currently, the major long institutions in the British pound exchange rate market already include 'Huifeng Global Asset Management', 'Pacific Capital', 'Barclays Bank Foreign Exchange Trading Department', 'Linghang Capital', 'UBS International Capital', 'Nomura Bank Investment Department', 'Blackstone Global Asset Management Center Foreign Exchange Investment Department', 'Vanligo Hedge Fund'; 'Hashimoto Asset'... and a host of other global core asset management institutions.
And more importantly, the Bank of England is also going long in the background, supporting the British pound exchange rate.
Even Frederick, the manager of the 'Aberdeen Asset Evolution No. 1' main hedge fund, with tens of billions of dollars under his command, could not reverse the market's form. Even if 'Huayin International' intervenes in the market, it cannot change anything.
Moreover, according to my guess, even if 'Huayin International' enters the market to go long, they won't invest too much capital.
After all, under extremely high investment risk. A young man from 'Huayi Capital' simply doesn't have enough weight to make a state-owned institution invest huge sums of money in such a gamble."
Xie Hongxing said,
"I think so too. It feels like this time in the British pound long-short battle, 'Huayi Capital' and CEO Su are really going to suffer a humiliating defeat, and the Fang family… this huge gamble is likely to fail, but given the Fang family's deep roots, their losses won't be too significant."
Gu Chijiang said,
"It's not just a humiliating defeat. I'm afraid after this battle, 'Huayi Capital' as an institution might cease to exist. If CEO Su doesn't cut losses and exit immediately, with more and more long forces continuously squeezing shorts, once short institutions panic and stampede to exit, it will inevitably lead to extreme upward fluctuations in the British pound exchange rate.
At that point… the 'Huayi Chengyuan No. 1' main fund managed by CEO Su will truly only have one path: a margin call."
Xie Hongxing nodded and added,
"However, for us, this is an excellent opportunity to reap huge profits."
Gu Chijiang smiled and said,
"Naturally so. Since the British pound exchange rate has begun to rebound sharply again after the short counterattack, it probably won't pull back significantly downwards again. Let's continue to increase our long positions using our current account's unrealized gains.
I feel that 'Huayin International's entry is highly likely to… not only fail to stimulate market followers to short, but instead cause major long institutions in the market to become even more aggressive in their short squeeze."
"Why do you think so, CEO Gu?"
Xie Hongxing asked.
Gu Chijiang said,
"Foreign institutions have always regarded Chinese capital institutions as fat sheep in the international financial market, and they primarily aim to besiege and hunt state-owned institutions.
Now that 'Huayin International' has actively entered, it's like a sheep entering a wolf pack, stepping into a short trap. Coupled with the huge capital power held by 'Huayin International'.
In the British pound exchange rate market, the foreign institutions going long, wanting to obtain more huge profits, will inevitably entice 'Huayin International' to continuously open positions and invest capital.
The short strength held by one 'Huayi Capital'. For these international capital behemoths, it might not be enough to satisfy them. Now, 'Huayin International's entry is completely to their liking."
Xie Hongxing pondered for a moment and nodded,
"That's true. But this doesn't have much to do with us. We just need to follow the trend and continue to go long."
"You can't say it has nothing to do with us,"
a strong hint of greed appeared in Gu Chijiang's eyes as he said,
"At least 'Huayin International's entry will make the probability of an extreme long market in the British pound exchange rate market increasingly higher, and our opportunity to seize huge market profits will also be increasingly greater."
Along with their discussion and continued increase in long positions.
In the British pound exchange rate market.
As trading hours continued, its exchange rate trend kept climbing, gradually passing the 1.5360 and 1.5370 marks.
And, as the British pound exchange rate regained strength and recovered from its回调跌幅 (pullback decline).
Within China, many retail investors, speculators, and market hot money groups who had previously shorted the British pound exchange rate with Su Yi and held positions until now.
At this time, their confidence in holding positions began to waver significantly again.
"Holy cow, it recovered all the declines from the Asian trading session so quickly. This British pound exchange rate trend… it feels like it can't fall at all. Ugh… my account is about to turn from profit to loss. Should I cut my losses while I can?"
Someone asked on an online forum frequented by domestic forex investors.
"I cut my losses anyway. I really can't see any signs of a short trend developing in the British pound exchange rate. Instead, the longs have been continuously squeezing shorts."
"It feels like CEO Su's firm bearish stance and shorting this time is going to fail!"
"It's getting harder and harder to understand. If CEO Su's bearish view on the British pound exchange rate is wrong, then why would 'Huayin International' publicly speak out in support of CEO Su's 'Huayi Capital' at this time and be willing to grant CEO Su a new credit line? And… why would 'Huayin International' enter the market to short and establish short positions?"
"'Huayin International's entry indeed seems very strange."
"It's not just 'Huayin International'. 'Aberdeen Asset' is also continuously increasing its short positions in the British pound."
"Looking at all market information, the main ones reducing short positions are not the major institutions in the market, but mostly the scattered retail investors."
"Overall, in the British pound exchange rate market, both long and short position volumes are increasing, right?"
"That's right, both long and short positions are in a continuous upward trend, but… it's clear that the rate of increase for long positions is still far exceeding that of short positions. As for the current outstanding open positions in the market… long positions are approaching 3 million lots."
"This long-short position volume is truly terrifying."
"Everyone is betting on the June 23rd referendum result. Shorts are betting, and longs are betting too."
"The longs are not only betting on the June 23rd referendum result, but also forcing 'Huayi Chengyuan No. 1' main fund managed by CEO Su to stop loss on a large scale, thereby triggering an internal stampede among short institutions."
"Is that possible? It feels like CEO Su won't easily stop loss and exit before the June 23rd referendum results are out."
"I feel the same way, but there shouldn't be any surprises with the June 23rd referendum result, right? Isn't the 'Brexit referendum' just a farce? It seems… impossible for the UK to actually leave the EU."
"Who knows if there will be any surprises before the results are out?"
"I'll still choose to gamble with CEO Su and trust CEO Su's choice."
"I also believe in CEO Su. I don't think CEO Su will easily admit defeat, let alone easily cut losses and cover positions. This long-short battle in the British pound exchange rate market is truly getting more and more exciting."
"CEO Su isn't afraid with billions of funds, what am I afraid of?"
"However, the longs in the British pound exchange rate market are truly strong. If the short institutions led by CEO Su don't launch a strong counterattack, I'm afraid it will be difficult to last until the June 23rd referendum day."
"It feels like the closer it gets to June 23rd, the more intense the long squeeze will become."
"Until the long and short forces in the market have completely determined a winner, the British pound exchange rate fluctuations during this period are expected to become extremely violent."
"With such a large volume of long and short positions, it's impossible for the market not to be volatile."
As many domestic investors and speculators continued their discussions…
When the foreign exchange market further transitioned into the US trading session, the British pound exchange rate showed another significant anomaly.
The British pound exchange rate, which had clearly broken through to around 1.5400 without any hindrance, immediately took a sharp downturn around 10 PM Chinese time, which was the beginning of the US trading session, falling back to around 1.5340 in less than half an hour.
At the same time, within these thirty minutes.
The number of new short positions in the British pound exchange rate market also surged rapidly.
"What… what's going on?"
Noticing the British pound exchange rate plummeted 60 pips in half an hour, Cedric, the fund manager at 'Linghang Capital Amanda Hedge Fund' trading room in Wall Street, New York, frowned instantly and quickly turned his gaze to the researcher in the Market Information Department.
Bella, the researcher from the Market Information Department, immediately responded,
"There's no news on the market, I don't know what's happening."
"It feels like a major institution in the market is aggressively increasing short positions, or collectively covering long positions,"
said Caroline, a trader at 'Amanda Hedge Fund'.
"We just don't know which major institution in the market it is, or what their motive is?"
"No need to guess,"
Guy, the Head of Hedge Fund Asset Management, walked into the trading room while Caroline was speculating, and shared his latest information,
"According to internal sources, the fund product managed by Humphrey, the market hedge fund manager of 'Blackstone Group', is aggressively increasing its short positions in the British pound exchange rate."
"'Blackstone Group'?"
Cedric said in surprise.
"Didn't they just release a market research report bullish on the British pound exchange rate?"
Guy said,
"Humphrey's shifts between long and short in the financial market cannot be predicted by common sense. Many probably didn't expect 'Blackstone Group' to turn from long to short."
"No wonder the British pound exchange rate showed such extreme volatility,"
Cedric suddenly realized.
Guy responded,
"It doesn't matter. As long as the underlying logic hasn't changed, and the overall market expectation hasn't changed, 'Blackstone Group's shift from long to short won't have too much impact on the market trend. Currently, the net long positions in the entire British pound exchange rate market are still quite large, and shorts won't be able to do much."
But unexpectedly…
He had barely finished speaking.
The British pound exchange rate showed a further downward trend.
Moreover, as trading continued, in the subsequent US trading session, the short forces on the market actually maintained a continuous advantage, pushing the British pound exchange rate back down step by step to around 1.5300.
Finally, when the time once again transitioned to the Asian trading session on Friday, June 17th.
After a full day of violent fluctuations, the British pound exchange rate had surprisingly returned to its position at the start of yesterday's Asian trading session.
This somewhat surprised Su Yi, as well as the core short institutions in the market that were linked with his 'Huayi Chengyuan No. 1' main hedge fund, such as 'Huayin International' and 'Aberdeen Asset Evolution No. 1' main hedge fund.
"CEO Su, according to market news, 'Blackstone Group' and 'Citibank' have cleared their long positions in the British pound exchange rate, and strategy analysts from both major institutions have started to be bearish on the British pound exchange rate,"
Qu Zecai said with some excitement at 9:40 AM in the 'Huayi Capital' company's internal trading room in Hong Kong City.
"This indicates that the short forces in the British pound exchange rate market are increasing. Next… it might not be as easy for the longs to aggressively squeeze shorts as it was before."
Su Yi responded with a smile:
"The sudden shift of 'Blackstone Group' and 'Citibank' is indeed somewhat surprising, but I said before that in the international financial market, as long as there are profit incentives, there will be no shortage of smart money. As market trading hours progress… just watch, more and more smart money will realize the drastic decline risk facing the British pound exchange rate."
"But at the same time, the market's open long positions are still increasing,"
Qu Zecai said.
Su Yi nodded and said,
"This is expected. After all, the apparent market expectation… is still leaning towards the long side. However… since major institutional capital like 'Blackstone Group', 'Citibank', and 'BNY Mellon' have already started to realize the drastic decline risk facing the British pound exchange rate, and have begun to intervene in the market on a large scale to establish short positions, then our opportunity and timing for a counterattack has clearly arrived."
At this point, Su Yi quickly connected with the two asset management managers from 'Huayin International' Investment Department One and Investment Department Two.
And Frederick from the 'Aberdeen Asset Evolution No. 1' main fund trading room.
"Everyone, currently in the British pound exchange rate market, the accumulation of long positions is already extremely massive, and the net long position volume has also accumulated to a scale of millions of lots,"
Su Yi said with sharp eyes and a smile.
"Coupled with more and more major institutions shifting from long to short, and more and more off-market institutions entering the market to short.
I believe… the time for us to further increase positions, suppress the current profit margins of the longs, and their confidence in holding positions.
Forcing the longs in the market to cover, or forcing the major long forces in the market to further increase positions to stabilize the British pound exchange rate, has definitely arrived."
Frederick said with a smile,
"You want to take advantage of the opportunity when various institutions are increasing or establishing short positions, to continue investing a large amount of capital in the form of increased positions, to further suppress the British pound exchange rate trend.
Because the collapse of confidence among the longs in the market, and at the same time entice the major long forces to further cover their positions?
The previous operation was to lure longs, what do you call this move now…?"
Su Yi responded with a smile:
"This is called biting onto the major long forces in the market, with the resolve of a direct confrontation, forcing them to continuously invest capital to engage in a huge gamble with us."
"It seems… the real long-short battle is only just beginning now!"
Hearing Su Yi's plan, Meng Shengfei, the manager of 'Huayin International' Investment Department Two, exclaimed with a smile, his eyes sparkling with excitement and enthusiasm, yet also a hint of nervousness and apprehension.
(End of Chapter)