Rebirth of the Capital Legend

Chapter 280 Internal Divisions of Wall Street Capital!

"But many institutions in the market should have some expectations about the referendum results in Scotland, right?" Cedric thought for a moment and said, "Based on the preliminary vote count in England, are they enough to offset the unexpected results in Scotland?
In other words, even if the voting and counting results in Scotland differ from the initial expectations of major organizations.

There will be no change in the final voting results.

Although Salmond has always wanted to promote Scottish independence, he has not shown a clear position on the trend of this round of Brexit referendum.

So I think that Scotland is the region with the greatest uncertainty in the voting results as expected by various institutions.

The difference in the voting results for Brexit or not should not be too big.

In addition, judging from the current attitude of the Bank of England and the monetary policy orientation, the pound exchange rate is unlikely to face the risk of an extreme fall.”

"Based on the current market data analysis, as well as institutional expectations, investor sentiment, and other factors, the risk of an extreme fall in the pound exchange rate is indeed not high." Guy nodded slightly and responded, "However, expectations that are too consistent are usually difficult to be perfectly fulfilled in the financial market."

"Oh, and there's an unconfirmed market rumor."

During the discussion among the key figures of the Amanda Hedge Fund, Bella, a researcher from the Market Information Department, paused and said, "I heard that many financial institutions in the UK are secretly increasing their long positions in the pound exchange rate, especially Huifeng Bank. According to preliminary estimates, the scale of the long position held by this institution has reached around 30."

"'Huifeng Bank' is a giant among British domestic investment banks." Cedric said with emotion, "Does it mean that the exact referendum result has come out?"

Guy thought for a moment and said, "That's impossible. If the referendum result had really come out, the market trading trend of the pound exchange rate would not be the current volatile pattern. It would have definitely made a straight line breakthrough in the bullish direction a long time ago. However... a large number of financial institutions in the UK have begun to generally go long on the pound exchange rate. This is indeed worthy of deep thought and attention!"

"Even if the referendum result is not announced, these British financial institutions generally increase their long positions. I am afraid that the referendum result on the 23rd will not be a surprise, right?" Cedric said, "In fact, based on the fundamentals, the pound exchange rate is not high at this stage, and it has the momentum for a strong rebound."

"In fact, if we are worried that the referendum result on the 23rd may be unexpected..." Trader Carolyn thought for a moment and suggested, "I think we can use a small portion of the funds to hedge in spot gold."

"Hedging on spot gold?" Cedric's eyes instantly turned to Caroline.

Caroline noticed Cedric's gaze, nodded, and continued: "In the current pound exchange rate market, due to changes in the exchange's trading rules, everyone's opening positions are relatively restricted, which means that whether you are shorting the pound exchange rate or going long on the pound exchange rate, you need to invest a huge amount of money.

If that's not certain enough...

The huge amount of capital investment, holding risks, and capital accumulation costs will definitely make many investors unable to bear it.

This has resulted in the recent pound exchange rate market being extremely volatile and the fluctuations being extremely intense.

However, in the gold spot market, transactions are currently not restricted.

Under the rules of margin trading, investors can still use a lower margin to open a standard contract with a leverage of 100 times.

In other words, if we go long on 1 lots of British pound exchange rate, we may need to invest 5000 million US dollars.

But if we want to buy 1 lots of gold spot, we only need a maximum of US$1000 million.”

"You mean... we can open long orders for the pound exchange rate and long orders for gold spot at the same time to conduct hedging transactions?" Cedric said, "If we make a wrong judgment and the referendum result on the 23rd is unexpected, and the pound exchange rate changes extremely in the short direction, and there is no time to stop loss, can we recover the losses by going long on gold spot? Similarly, when we make a correct judgment and the pound exchange rate changes extremely in the long direction, then we can also make a profit in the gold spot market by quickly stopping the loss of the gold spot short order?"

"Yes, that's right." Caroline nodded and smiled, "This is equivalent to an insurance for our transactions in the pound exchange rate market. After all, the gold spot market is not the main battlefield for long and short positions at present, and the number of long and short positions accumulated in the market is far less exaggerated than that in the pound exchange rate market.

The small size of long and short positions means that stop loss will not be that difficult.

Actually...

Currently, many institutions are making bilateral bets, using the gold spot market to complete hedging transactions and control the risks of unilateral bets in the pound exchange rate market. "

"I think what Carolyn said is a good idea." Guy thought for a moment and responded, "Completing the hedging through the gold spot market can prevent us from investing too much money in the pound exchange rate market, and also avoid the embarrassing situation where we cannot stop loss and close our positions once extreme market conditions occur.

Of course, this method is just in case.

According to the market news we have at present, as well as the summary and analysis of various information, I still believe that there will be no surprises in the referendum result on the 23rd. At the same time, the Bank of England will continue to increase the intensity of open market operations, thereby pushing the pound exchange rate to continue to rise. "

"Okay." Seeing that Guy had agreed, Cedric thought about it for a moment and nodded.

Compared to the more or less worries in everyone's hearts.

In fact, he is very determined in his heart. He does not think there will be any unexpected results in the referendum on the 23rd, nor does he think there is any risk of an extreme drop in the pound exchange rate.

Of course, using the corresponding one-fifth of the funds.

In spot gold, establish an equal long position to hedge risks.

In his opinion, it would not consume much of the fund's reserve funds. At the same time, if the judgment was correct, immediate stop loss would not erode too much profit from the fund's huge long position in the pound exchange rate. So after thinking about it for a while, he agreed.

Caroline saw that both fund managers agreed to establish some hedging orders to guard against risks.

A smile instantly appeared on his face.

Afterwards, without waiting for the two leaders' instructions, he conveyed the relevant trading instructions to the traders in the trading room.

As the global asset management institution "Pilot Capital" increased its long position in the pound exchange rate while establishing a long position in gold spot, the trend of the pound exchange rate.

After violent fluctuations in the early U.S. trading session and a brief decline.

It slowly began to move towards the range above 1.5300 points, gradually correcting the diving trend at the beginning of the US trading session.

At the same time, it seems that everyone is aware of the use of spot gold to hedge the risks of the pound exchange rate market trend.

When the pound sterling exchange rate fluctuated upward, the spot gold price also clearly fluctuated in the opposite direction, forming an obvious negative feedback trend with the pound sterling exchange rate trend.

"The trend of the pound exchange rate is actually rising again."

Seeing that after the violent fluctuations at the beginning of the trading session, the bulls once again took the leading position in the pound exchange rate market, Enoch, the fund manager in charge of foreign exchange investment in the foreign exchange investment and trading department of Citibank on Wall Street, showed a slightly surprised look on his face.

"This shows that there is actually quite a lot of capital on Wall Street that is long on the pound," said Edmund, head of market research at Citibank's foreign exchange investment center, with a smile. "Many European capital institutions are clamoring that... it is our Wall Street capital that is shorting the pound, which is completely a fallacy."

"That's indeed a fallacy." Enoch nodded. "According to the preliminary position data of major institutions in the market, the capital institutions in the Asia-Pacific region should hold the largest number of short positions in the market, right?"

Edmund responded: "To be precise, it should be a Chinese-funded institution. Oh... Of course, the main hedge fund 'Aberdeen Asset Evolution 1' managed by Frederick is also the absolute core force of short selling in the pound exchange rate market. It seems that the number of short positions held by it has exceeded 30 lots."

"To be honest, unilateral shorting of the pound exchange rate... this is really not like Frederick's past investment style." Enoch said, "But then again, in the 'Swiss franc black swan' event last year, this guy stood out from the crowd and shorted the Swiss franc exchange rate, betting that the Swiss National Bank would not easily support the Swiss franc's market exchange rate, and made a profit of more than 10 billion US dollars in one fell swoop. It was indeed amazing."

"Could it be that... Frederick thinks that this bull-bear storm in the pound exchange rate market will also be another 'Swiss franc black swan' event?" Edmund said, "Based on the current fundamentals and news, it's unlikely, but it's not impossible."

"This guy may really have this idea." Enoch said, "But now in the pound exchange rate market, the net long position is approaching 100 million lots. With such a highly consistent long expectation, it has become meaningless to continue to go long on the pound exchange rate, and it is difficult to obtain excess returns in the market."

"But heavy short selling is also extremely risky," said Edmund.

"Let's wait and see what choice Humphrey from Blackstone Group will make," said Enoch. "I hope the bulls in the market can squeeze out even more at this time, pushing up the bullish expectations before the referendum. In this way, if we short at high levels and gamble on the slightest chance of a 'black swan', we can maximize our profits and investment cost-effectiveness."

"Humphrey seems to have a very good personal relationship with Frederick." Edmund said, "This guy has suddenly changed from bullish to bearish recently. It's hard to say whether he is influenced by Frederick."

"Well, that's possible." Enoch nodded.

"Oh, by the way, the Chinese-funded institutions headed by Huayin International are also heavily shorting the British pound exchange rate this time." Edmund said, "And I haven't heard of any news that this Chinese-funded institution has conducted hedging transactions on other foreign exchange products, which is quite strange.

After all, in past history.

Because of "Chinese-funded" institutions, they have been repeatedly harvested by the numerous capitals in the international financial market.

In recent years, Chinese capital has been very cautious in its overseas investments, especially in international financial markets.

It is hard to see such large-scale investment in single-direction shorting or longing.”

"We don't know the real reason why Huayin International, an institution, is heavily shorting the pound exchange rate," Enoch said, "but the underlying logic must exist.

We don’t need to analyze the other party’s reasons for short selling and the logic they follow.

It is more important to start from yourself and choose the timing and opportunity. "

"That's right." Edmund nodded and wanted to say something else.

At this time, market intelligence officer Boris had already opened the door of the trading room and walked in quickly, reporting to Edmund: "According to the latest market news, the Blackstone Group is still increasing its short positions in the pound exchange rate. I also heard that the hedge fund trading department headed by Mr. Humphrey has mobilized tens of billions of dollars in funds and plans to continue shorting the pound exchange rate."

"Oh my God..." Edmund exclaimed, "Is this guy crazy?"

Enoch was also somewhat shocked when he heard the news. He took a moment to come to his senses and said, "It seems that Humphrey is certain that the referendum result on the 23rd will be unexpected. I wonder what exact news he has received. Could it be that the preliminary vote count in Scotland... has shown an outrageous result?"

"Isn't that possible?" Edmund replied subconsciously, "I don't think there will be any problems in Scotland."

"It seems that the battle between bulls and bears on the pound exchange rate is becoming more and more exciting." Enoch said with a smile.

"Should we... follow?" Edmund asked.

Enoch did not answer for a moment, but paced around the trading room, pondered carefully for a while, and then made up his mind and replied: "When it is time to be greedy, you still have to be greedy. At present, the cost of holding positions of our institution is obviously due to the "Aberdeen Asset Management", "Blackstone Group" and the "Chinese-funded" institution, which is the core short-selling force in the market. Let's follow... Under the overly consistent expectations, the winning rate of shorting at this time should be higher than that of longing."

After saying this, he turned his sharp eyes towards the various trading groups in the trading room.

Corresponding trading instructions to continue following the trend and short selling were issued quickly.

As his orders were issued, Blackstone Group also began to short sell on a large scale.

Almost in an instant, the pound sterling exchange rate, which had been slowly fluctuating upward, suddenly plunged again, with a rapid collapse of more than 50 points, falling back below 1.5300 points, once again forming a comprehensive suppression on the bullish forces that were actively going long in the market and the bullish institutions in the market.

(End of this chapter)