Rebirth of the Capital Legend

Chapter 267 Differentiation of market bullish forces!
"Huayin International actually entered the market to short sell. I really didn't expect that."

Faced with the pound sterling's rapid fall back to the 1.5400 mark, Godfrey, from the trading department of 'Huifeng Global Asset Management Universal Hedge Fund', showed a look of obvious surprise on his face, but the small 70-point pullback did not make him show any nervousness in his heart.

After all, even though the main hedge fund product he manages has added a lot of long positions in the exchange rate range above 1.5400 points, the fund's current overall long position is still in a state of substantial floating profit.

Moreover, he anticipated that the short sellers in the market would launch a dying counterattack.

"The entry of Huayin International is indeed a bit surprising," said Gerald, the head of the fund trading team. "But what is even more surprising is the amount of cash reserves held by Huayi Capital. We all thought that the short positions held by this institution were on the verge of liquidation, but we didn't expect that they still had hundreds of millions of dollars in cash reserves. This is completely different from the information we investigated before!"

When Godfrey heard Gerald mention this, he frowned slightly and said, "The amount of cash reserves in Huayi Capital is indeed far from our previous survey data. It seems that... Mr. Su is really something. In such a short period of time, he has raised several hundred million dollars in funds."

"The position ratio of the 'Hua Yi Cheng Yuan No. 1' hedge fund is completely different from our previous prediction..." Gerald said, "At present, it is unlikely to force this fund to stop losses on a large scale, or even to blow up its positions. This will stimulate many long investors in the market to give up their previous goals and then take profits and close their positions. If other long main funds in the market do not continue to force shorts, Mr. Godfrey, I am afraid that the pressure for the pound sterling exchange rate to break through upward will become extremely great, and the shorts will have a good chance to fight back."

"The underlying logic behind the rise in the pound exchange rate has never been the short selling of Huayi Capital," Godfrey said. "Naturally, its trend will not change just because Huayi Capital has obtained new capital injections through short-term financing and reduced its position risk.

Furthermore, the main short-selling institutions in the market release so much information at a concentrated rate.

Influence market sentiment through various unconfirmed or even groundless false news.

This fully demonstrates that the short sellers in the market are no longer able to withstand the continued upward pressure of the market, as can be seen from the rapid decline in short positions in the market before.

The market trend is very strong.

Even if Huayin International chooses to enter the market and short sell at this time, it will be difficult to reverse the market on its own.

not to mention……"

Godfrey paused when he said this, and continued: "In my opinion, the entry of Huayin International will further stimulate more large asset management institutions to enter the market and go long, hunting for this Chinese institution with strong financial strength."

"It's not just Huayi Capital and Huayin International that are releasing news to the market," Gerald said. "Many media organizations under the Aberdeen Asset Group are also constantly exaggerating the changes in the long and short positions in the pound exchange rate market, guiding short-selling capital to enter the market.

These media organizations have made such a move...

This is contrary to the news we have received previously that the top management of Aberdeen Asset Management Group is dissatisfied with Mr. Frederick, the hedge fund manager of Evolution No. 1, who is in charge of tens of billions of dollars of funds. In addition, the voices of these media organizations also fully demonstrate that Aberdeen Asset Management's internal expectations and views on the future trend of the pound sterling exchange rate should be clearly bearish.

As one of the top ten asset management institutions in the world, Aberdeen Asset Management manages nearly one trillion US dollars in assets.

If they are firmly bearish on the pound exchange rate.

Once the main hedge fund "Evolution No. 1" headed by Mr. Frederick falls into the position risk stage, we will definitely provide support.

Moreover, such a large asset management institution is bearish and shorts the pound exchange rate.

It will also have a huge impact on market sentiment, inducing many long funds in the market to reduce their positions, and will also induce a lot of follow-up funds to enter the market to short."

"It's okay. Although the internal actions of Aberdeen Asset Management are somewhat unexpected, we have expected this before." Godfrey said, "Who are the main short-selling institutions in the current market besides Huayin International, Huayi Capital and Aberdeen Asset Management? Generally speaking... the short-selling power in the market is still relatively weak at this time. Once the emotional reaction is over and everyone returns to rationality, the bulls will regain their absolute advantage, and the pound exchange rate will quickly recover its lost ground as before.

What's more, the Bank of England is behind the exchange rate to stabilize it.

With the Bank of England still having many cards to play to stabilize the exchange rate, the shorts in this position can’t make any waves even if they shout at the top of their lungs.”

"Then...according to Mr. Godfrey's strategy..." Gerald paused and asked, "Should we stick to the original trading strategy, firmly go long, and continue to squeeze out the shorts?"

Godfrey nodded and said, "Yes, continue to go long. In my opinion... this short-selling counterattack is just a dying counterattack by the main short-selling institutions in the market."

As the two analyzed and discussed the rapid changes in market exchange rates.

At the same time, there were many major long institutions in the market who had the same idea as Godfrey.

Among them, Tianhe Capital Trading Department.

After hearing the news that Huayin International had entered the market to short sell, Gu Chijiang did panic for a moment, but after calming down, he realized that this was a dying counterattack by the bears and would not change the trend of the pound exchange rate. He then smiled and greedily followed the two major long institutions in the market, Huifeng Global Asset Management and Mitsui Yoshitomo Investment Company, to continue to go long and open long positions.

Instead, it is the Barclays Bank Foreign Exchange Trading Center, located in the City of London, far across the ocean.

After seeing the short-selling analysis report on the British pound exchange rate posted by Su Yi on the Internet, the declaration of war on all the long institutions in the market, and the numerous bearish reports from the US-funded institution Aberdeen Asset Management, Claude, the hedge fund manager of 'Lion International', his original bullish beliefs began to waver in an instant.

"Alex, regarding the Brexit referendum on the 23rd, is there any important information in the market that we have missed?" Claude stared at the large number of long positions held by the hedge fund he managed on the main control computer, and turned to Alex, the head of the market analysis department, and asked, "Have you completed the collection of the preliminary research report on the referendum on the 23rd and the result prediction data of each city?"

Alex responded: "The central bank has indeed been conducting market operations recently, and it is determined to stabilize the market exchange rate. Apart from the Brexit march in Scotland in recent days, there is no other important news in the market. According to our agency's preliminary survey and voting result forecast, as well as model calculations, there will be no surprises in the referendum result on the 23rd."

"But I'm always a little uneasy in my heart..." Claude said.

"Could it be because of the weather? I haven't slept well recently?" Alex said, "The weather in London has changed very quickly recently. It feels obviously different from previous years."

"It's not the weather." Claude waved his hand. "From the beginning, when the Brexit referendum was passed by the cabinet, I felt that things were going a bit beyond the original trajectory. Now... in a market that is obviously bullish, institutions like Huayin International and Aberdeen Asset Management are openly shorting, which is even more beyond the original trajectory. According to normal logical reasoning, in a market where bulls obviously have an absolute advantage, shorting should be extremely risky. Large asset management institutions like Huayin International and Aberdeen Asset Management will never intervene heavily without considering the risks. But now, not only are these two institutions intervening heavily, but they are also full of confidence. This cannot but make people vigilant."

"But according to our team's research and information collection, there is indeed no news in the market recently that is sufficient to affect the trend change of the pound exchange rate." Alex said, "Currently, the views of major domestic financial institutions on the exchange rate market are mostly bullish." Claude laughed and said, "It is because most people are bullish that I feel uneasy. You know, the financial market is reflexive most of the time.

Well, since I feel uneasy, it is better to reduce some of my long positions first.

Half a century ago, the famous market speculator Livermore once said that when you are confused and uneasy about the future gains and losses of the positions you hold, the best strategy is to trust your intuition and reduce the positions that make you uneasy.

Having said that, Claude immediately turned around and instructed the trading groups in the trading room to reduce some of their long positions.

As Barclays Bank's 'Lion International' hedge fund began to reduce its long positions, it covered the corresponding long positions.

The British Pound Exchange Rate Market...

The pound exchange rate, which had already fallen to the 1.5400 mark and fluctuated, fell further, breaking through the 1.5400 support level and quickly slipped to around 1.5350 points before stabilizing again.

Moreover, the pound exchange rate plummeted 100 points from its high within half a day.

The number of short positions in the market quickly broke through the one million mark again, and the gap with the long positions narrowed to less than one million.

However, despite the market.

The bears won a temporary victory in the all-out counterattack.

However, when the market trading hours shift from the European session to the more active US session.

When many speculative intraday long traders in the market either took profits or stopped losses, that is, when the number of long coverings began to decline, the pound exchange rate began to fluctuate upward again and regained lost ground.

"What did I say? This is the bears' last gasp. It's a trap to lure shorts."

During the U.S. trading session, in New York, Wall Street, in the headquarters of Vanguard Capital Group, in the trading room of the hedge fund Amanda, fund manager Cedric said with a smile when he saw the pound sterling exchange rate bottoming out and rebounding.

"It can't be called a trap to lure short sellers." Guy, the head of hedge fund asset management at the group's investment department, said in the trading room, "Mr. Frederick of Aberdeen Asset Management should not be underestimated. The battle between long and short positions in the pound exchange rate market has not yet been decided."

"Frederic?" Cedric smiled and said, "That's just the way it is. If he hadn't been lucky in the last 'Swiss Franc Black Swan' incident, I'm afraid the 'Evolution No. 1' hedge fund he managed would have been wiped out and ceased to exist. This time he is even thinking about shorting and waiting for another 'Black Swan' to appear. How can there be so many 'Black Swan' events in the market? This round of Brexit referendum, no matter how you look at it... is just a procedural process, and it is impossible for a real Brexit result to occur. But... since someone wants to bet on such an extremely low probability event, there is nothing wrong with taking this opportunity to harvest a wave of shorts in the market."

"You want to stay long?" Guy asked.

Cedric nodded slightly and responded, "The short-selling counterattack is complete, and most of the intraday long positions that should be covered have been covered at this time. The market's net long position has also fallen from over one million lots to around 90 lots. If we don't continue to go long now, when will we continue to go long?"

After saying this, he didn't wait for Guy to respond.

He directly issued trading instructions to the traders to continue to increase their positions and buy long orders on the British pound exchange rate.

At the same time when he issued the trading order, Humphrey, a hedge fund manager in the foreign exchange market at the trading department of Blackstone Global Asset Management on Wall Street, received a call from Frederick of Aberdeen Asset Management in Hong Kong, across the ocean.

"Hey, old friend, I heard you're long the pound," Frederick asked on the phone.

Humphrey responded: "Yes, I didn't expect that we would be the opponents this time."

"As a competitor, I welcome you to be my counterparty and go long on the pound sterling exchange rate with all your strength," Frederick said. "But as a friend, I feel I have the obligation and necessity to remind you of the huge risks of going long on the pound sterling exchange rate at this time."

"A huge risk in going long on the pound?" Humphrey smiled. "I don't think so."

Frederick said: "My friend, I am not trying to convince you, I just want to show you a recent data from our agency on the intentions of many people in major cities in the UK regarding the referendum result on the 23rd."

After that, Frederick sent a data report to Humphrey's mailbox.

Humphrey opened the email and took a look at the internal data provided by Frederick. For a moment, he was completely dumbfounded and asked, "Is this... is this true?"

"If you think it's true, then it's true." Frederick responded, "If you think it's false, then it's false. From my personal point of view, I think we have all misjudged the outcome of the referendum. Just looking at the poll data in London and its surrounding cities, the public's willingness to vote for Brexit is indeed far lower than their willingness to vote for not Brexit. But the whole of Britain is not just a few big cities..."

Ever since the first time I met Su Yi privately and heard his analysis.

Frederick secretly asked the market strategy department of Aberdeen Asset Management Group to use various relationships to conduct a market sampling survey of major cities and non-core cities and regions across the UK. The coverage was not very wide, but the actual deviation would not be small.

He originally thought that was the final research result.

In terms of opinions on Brexit and not Brexit, it should be very close to 50%.

But when the data statistics were completed, the final results surprised him.

This was the fundamental reason why he later decided to short the pound exchange rate and also received full support from other departments within the group.

"If that's true, then I'm afraid I'll have to change my current trading strategy," Humphrey said.

(End of this chapter)