Starting with a fully invested A-share portfolio to become a capital...

Chapter 275: Zhang Yang reaped HK$23.1 billion in one fell swoop and was summoned by the Hong Kong Monetary Authority.
The Yangtze River Tower.

Goldman Sachs.

When Lin Guangchang, sporting a head of premature gray hair, wearing a simple black jacket, and exuding a refined and approachable demeanor, entered the 66th-floor office area, the slightly shorter Solan Avery quickly stepped forward to greet him.

"Mr. Lin, welcome."

"Hello, manager."

Lin Guangchang nodded in response.

He still remembered Solan Avery, but had forgotten his name. If it were a simple name like David, James, or John, he might remember it, but other Western names were really too long and difficult to pronounce.

Solan Avery didn't pay attention to these details; after all, the customer is king, and the man in front of him was the king among kings.

"Come with me, our CEO David has been waiting in his office for quite some time." He smiled and gestured for them to follow.

Seeing this, Lin Guangchang nodded and replied, "Thank you for your trouble."

"this way please."

Solan Avery led the way.

After passing through several office areas, Solan Avery led Lin Guangchang to the door of an office. He then knocked on the open door frame and said, "President, Mr. Lin has arrived."

David Smith was working on some documents when he saw Lin Guangchang. He quickly closed the folder, stood up, and greeted him with a smile, saying, "Mr. Lin, it's nice to see you again. You're as charming as ever."

"President David, you've gotten even more robust in just a few days."

Lin Guangchang answered fluently.

Perhaps due to years of training and his height of 1.88 meters, Lin Guangchang, who is 1.75 meters tall, looks petite when compared to David Smith.

Despite the difference in height and build, Lin Guangchang showed no stage fright and shook hands with him calmly.

This world is a dog-eat-dog world. The weaker you appear, the easier it is to be taken advantage of. Only inner strength can earn respect.

After a brief handshake, David Smith gestured for him to proceed and said with a smile, "Please move to the sofa in the negotiation area."

Lin Guangchang: "Haha, okay."

As soon as he finished speaking, David Smith looked at Solan Avery and said, "Avery, go find the original options contract."

"Okay CEO."

Solan Avery turned and left.

After moving to the sofa in the negotiation area, David Smith poured water for Lin Guangchang and then asked, "Mr. J still hasn't come to Hong Kong Island?"

He knew that Lin Guangchang was just a gofer, and there was another gofer named Liao Guopei, who was also a "little brother". The real mastermind was actually "Mr. J", who directed them to do the work.

Although Xu Xiang, Zhao Danyang, Wang Yawei and others already knew that "Mr. J" was Zhang Yang, they did not spread the word, so David Smith remained in the dark.

"He has some things to take care of in Southeast Asia, so he can only entrust me to exercise his authority," Lin Guangchang told a little lie.

"He also has businesses in Southeast Asia?" David Smith asked, somewhat surprised.

Southeast Asia is different from East Asia. Resources are highly concentrated in this region. 1%, no, you could say 0.1% of the population controls 80% of the wealth.

In poorer countries, wealth tends to accumulate at the top, forming a pyramid shape, which essentially indicates a problem with distribution.

"Well, hehe."

Lin Guangchang picked up his water glass, took a sip, and did not give a direct answer.

However, David Smith interpreted this action as tacit approval. He looked at Lin Guangchang with newfound respect and remarked, "If only I could see Mr. J's true face once. I'm really curious about what he looks like."

"There will be a chance."

Lin Guangchang put down his water glass.

The two chatted for a while longer until Solan Avery knocked on the doorframe.

"咚咚-"

"President, here are the contract documents you requested."

Solan Avery walked into the office, strode to the meeting area, and handed a stack of documents to David Smith.

Taking the documents, David Smith looked at Lin Guangchang and asked again, "Both options and short positions need to be settled, right?"

"Yes."

Lin Guangchang nodded.

He also took out the relevant documents and vouchers from his briefcase and waited for the other party to verify them.

“Account 346…667, a mainland securities account, shorted HK$3 million worth of Huaguo Unicom shares at an opening price of HK$11.68, with a total of 2568.49 million shares. The settlement price was HK$9.86, and the daily interest rate was 0.0278%, which is HK$8.34 per day.”

David Smith glanced at the opening date and said, "Mr. Lin, your opening date was November 2nd, and it is now November 11th. The total opening period is 10 days. Based on HK$83,400 per day, you need to pay HK$834,000 in daily interest on the securities lending. Please check it."

"It's been checked. You can just deduct the HK$83.4 directly."

Lin Guangchang answered quickly.

Before coming to Hong Kong Island, Zhang Yang had already explained the precautions clearly and emphasized that if anyone was unsure about anything, they should call him again.

“No problem,” David Smith replied, and continued calculating: “The opening price is 11.68, and the closing price is 9.86. The profit per share is HK$1.82. Multiplying 2568.49 shares by the profit of HK$1.82 per share, and then subtracting the daily interest of HK$83.4, Mr. Lin, your short position has a profit of HK$4591.25. Please check the amount.”

"Correct."

Lin Guangchang replied without hesitation.

For a speculative investor, calculation is a basic skill. Moreover, before arriving at Goldman Sachs, he had already roughly calculated that the profit from the short position would be more than HK$4500 million.

“If everything is correct, I’ll have someone print the settlement statement.” David Smith closed the file and looked at Lin Guangchang.

"Thanks for your hard work."

Lin Guangchang nodded in confirmation.

“Go through the settlement process.” David Smith handed the documents to Solan Avery.

"Okay CEO."

Solan Avery responded, took the blank order documents and contract, and quickly left the office to go to the counter to settle the payment.

No sooner had Solan Avery left than David Smith produced the "Short-Term Out-of-the-Money Options Contracts" document and said, "10 put option contracts, each corresponding to 1000 shares, have a total value of HK$11.68 billion. If the exercise price is HK$9.86, each contract will yield a profit of HK$1820. 10 contracts would amount to HK$1.82 million. Mr. Lin, could you please verify this again?"

"The number is correct."

Lin Guangchang nodded in confirmation.

“If the profit figure is correct, we still need to calculate the fees to be paid,” David Smith said, turning a page of the contract.

"Because you purchased the shares using mainland stocks as collateral, the premium was not settled on the same day. The exchange rate on November 2nd was 0.88009, pegged to 10.288 billion Hong Kong dollars. Based on the 1.5% premium, that's 1543.2 million Hong Kong dollars. We can pay the settlement fee and stamp duty on your behalf, or you can pay them yourself at the Hong Kong Stock Exchange."

"How much will it cost if you pay on my behalf?" Lin Guangchang asked.

"The settlement fee is HK$500, and the stamp duty is 0.003% of the transaction amount. For HK$11.68 billion, that's HK$3.5."

David Smith paused for half a second, his brain working over the time, and said, “Today the exchange rate of Hong Kong dollars to Chinese yuan is 0.881, which translates to a premium of HK$1751.65. If you entrust us to pay the settlement fee and stamp duty, the total cost will be HK$1755.2. Mr. Lin, your net profit will be HK$1.64448 million.”

"Okay, no problem, I'll trouble you to pay on my behalf." Lin Guangchang nodded in confirmation.

"haha ok."

David Smith laughed.

Shortly after calculating the profit from the "Short-Term Out-of-the-Money Options Contract," Solan Avery quickly returned, holding a signed slip in his hand. He handed it to Lin Guangchang and said, "Mr. Lin, please confirm the remittance account and amount. If there are no problems, please sign to confirm."

Due to China's strict foreign exchange controls, when Lin Guangchang and Liao Guopei arrived in Hong Kong last time, they opened HSBC accounts to use as receiving accounts for settlements.

After confirming that the bank number was correct, Lin Guangchang took the pen and neatly signed his name.

"All right."

As soon as he finished speaking, David Smith handed the contract to Solan Avery and said, "The premium is HK$1751.65. Mr. Lin has entrusted us to pay the HK$500 settlement fee and HK$3.5 stamp duty on his behalf. The total cost is HK$1755.2, and the net profit is HK$1.64448 million. Go and process the option settlement."

"Okay CEO."

Solan Avery then quickly left.

The short position yielded a profit of HK$4591.25 million, and the options profit was HK$1.64448 million, for a total profit of HK$2.103605 million, equivalent to RMB1.85327 million.

This only includes Goldman Sachs; there are also more than ten other institutions such as Citibank, HSBC, Tai Fook Securities, and Sun Hung Kai Properties, which have not yet settled their short positions and options.

……

And on the other side.

A Starbucks on the Middle Ring Road.

Jia Jiahao from the agency was handing out registration documents to the young man in front of him, saying, "Mr. Zhang, these are the name approval documents. We confirmed with you by phone that the company name is Shengtian International Group Co., Ltd."

“When registering an offshore company on Hong Kong Island, you cannot use a post office box, so you must have a physical address on Hong Kong Island. We have found a licensed secretarial company for you. The cost of renting a registered address is HK$2000-5000 per year.”

"You will also need a statutory secretary, who must be a Hong Kong Island resident or a secretarial company holding a TCSP license, to handle government communications and compliance matters. If Mr. Zhang does not have a Hong Kong Island resident candidate at the moment, he can entrust us to find a secretarial company to serve as such, with an annual fee of approximately HK$3000-8000."

Zhang Yang nodded slightly and replied, "Yes, you can handle everything."

He's unfamiliar with Hong Kong Island, so there's no need for him to go through all that trouble. It's best to leave the registration of the offshore company to an agency.

"Thank you for your trust, Mr. Zhang. Let's keep the phone line open. I'll go submit the documents first," Jia Jiahao said, standing up.

"Well, let's go."

Zhang Yang nodded slightly.

Hong Kong Island is a very fast-paced city. Jia Jiahao arrived quickly and left quickly, rushing to submit the registration documents.

Registering a company on Hong Kong Island isn't too difficult, it's just that the waiting time is a bit long.

For example, after the registration information is approved, the SCR filing review takes 3 to 7 working days. The so-called SCR filing is to submit the "Registration of Important Controllers" and disclose the ultimate beneficiaries and their shareholding ratios.

After the registration is completed, you still need to open a bank account in the Hong Kong Island area. Generally speaking, the account opening review time is 7 working days.

Zhang Yang couldn't possibly stay in Hong Kong Island for that long, so entrusting an agency to handle things remotely was the best option.

After watching Jia Jiahao leave, Zhang Yang glanced at his watch and muttered to himself, "Yangjia and Wuyingjiao should be finalizing the settlement with the agency. Hong Kong dollars are US dollar exchange certificates. This time the money is in Hong Kong Island. Unless absolutely necessary, it's best not to easily exchange it for Chinese yuan."

Foreign exchange controls allow only inflows, not outflows. As of November 2009, each Chinese citizen had an annual foreign exchange quota of US$50,000.

According to Zhang Yang's rough estimate, the "Zhangjiang gang" could make a profit of about 18 billion to 20 billion yuan by shorting China Unicom.

如果按照每人每年5万美元的外汇额度换算成港币，就是每人每年38.75万港元，想把18到20亿华国币兑换成港元，得花4000年到5000多年去兑换。

Hong Kong Island has no foreign exchange controls, so money that goes to Hong Kong Island is equivalent to money that goes to the whole world. Therefore, Zhang Yang does not intend to convert the profits from this round into Chinese Yuan.

As for setting up an offshore company, this is actually a legal way to exchange foreign currency and transfer it out reasonably through dividends.

For an "ambitious man," Zhang Yang is not limited to the domestic capital market; his goal has always been to break through Wall Street.

To break through Wall Street, you need to have enough money.

"Is it Mr. Zhang Yang?"

Just as Zhang Yang was waiting for Liao Guopei and Lin Guangchang to settle the accounts, a bald man in a suit, with a muscular build, walked up to Zhang Yang, showed his identification, and said, "Hong Kong Monetary Authority, please come with me."

Zhang Yang glanced at his identification, which clearly showed his position and name, as well as the name of the Hong Kong Monetary Authority.

"They arrived so quickly," Zhang Yang muttered to himself.

He didn't expect to get away with it, after all, the mainland and Hong Kong have many connections, and it's possible to find out if you want to.

Moreover, he already knew from Bao Xingwei's visit last time that his movements had been noticed by the top leadership of China.

Since there was no illegal activity and all profits were legal and compliant, Zhang Yang remained calm. He countered with a question: "I cannot verify the authenticity of the documents. If there is anything, we can sit down and talk. It is dangerous to be detached from public supervision."

Having spent most of his previous life in the United States, he was well aware that kidnapping and extortion always occurred outside of public scrutiny.

There's a 99% chance the other person's identity is real, but what if they're one of the 1% exceptions?

Better safe than sorry. After all, even Li Ka-shing's son has been kidnapped. If Zhang Yang were to be kidnapped, who knows what might happen?

"It's not me looking for you, it's our bureau chief," the bald man explained again.

"The director?" Zhang Yang smiled faintly upon hearing this. "I'll call the police to confirm your identity first, and then we'll talk about whether or not to go to the Financial Regulatory Bureau. After all, we mainlanders are taught by our parents from a young age not to go with strangers easily."

"You...you may go ahead."

The bald man in the suit was speechless, feeling that being flamboyant was making a mountain out of a molehill.

However, Zhang Yang believes this is not making a mountain out of a molehill, but rather taking responsibility for himself.

He could just show off any ID and go with them, and if he died far from home, no one would even know.

"Hello, Central Ring Road..."

Zhang Yang dialed the police.

In less than 5 minutes, three Hong Kong police officers arrived. They were dressed like police officers in Hong Kong dramas, wearing black berets, dark police jackets, and with police tools hanging from their waists.

"Who called the police?"

The lead male police officer questioned him.

“Me.” Zhang Yang stood up, looked at the bald man in a suit from the Hong Kong Monetary Authority, and explained the situation: “This bald man claims to be from the Hong Kong Monetary Authority and wants me to go back to the office with him. My request is that you verify his true identity.”

"Sir, please show me your identification."

The lead male police officer reached out his hand, his eyes scanning the bald man in the suit.

The two deputies were ready at any moment and would step forward immediately at the first sign of suspicion.

"My work permit and ID card are here. If all else fails, you can call the Financial Regulatory Bureau. My name is Chen Haobei."

"We will."

After taking the documents, the lead male police officer began to check them, while his deputy checked the ID for any criminal records.

"Cough-cough-"

At that moment, a portly, middle-aged man with a receding hairline, about 1.67 meters tall and exuding an imposing presence, walked into Starbucks. The bald man in the suit straightened his back a bit when he saw him.

"King Bureau."

The lead police officer followed the gaze of the bald man in the suit and spotted the man with the receding hairline. His distinctive features, often seen on television and in newspapers, instantly reminded him of the man's identity, and he quickly greeted him, "Chief Wang."

“He’s one of my men, no need to investigate.” Wang Mingxu first confirmed the bald man in the suit’s identity, then looked at Zhang Yang and said with a faint smile, “Being so cautious in your actions is a bit different from what Old Bao said on the phone.”

With just one sentence, Wang Mingxu made his stance clear.

When Zhang Yang heard the other person mention Bao Xingwei, he instantly realized how he had been exposed. He half-jokingly said, "It's always good to be careful when you're out and about. Besides, this guy doesn't look like a good person, haha."

"He does look a bit fierce." Wang Mingxu had barely finished speaking when he invited, "How about we go to the car and chat for a bit?"

"it is good."

Zhang Yang took his first steps.

After his identity was confirmed, he was happy to explain his position.

After leaving Starbucks, the two went to the back seat of a Mercedes-Benz. The car was well-heated and there was no cold at all.

"Wang Mingxu, this is my business card. I'm here to see you for no other reason than to ask you a few simple questions."

Zhang Yang accepted the business card and became humble, saying, "Please speak, Director Wang."

"Your investment of 11 billion Hong Kong dollars to short China Unicom on November 2nd caused quite a stir. Now that China Unicom's stock price has been falling continuously, it's inevitable that some people suspect insider trading. So I'd like to know your buying logic."

Before asking his question, Wang Mingxu turned on the recorder in front of Zhang Yang.

Clearly, he wanted to record the whole thing to give an explanation to those who questioned the inside story.

Zhang Yang smiled faintly, unconcerned about the recording, and said: "The logic of short selling is very simple: it's about making money by exploiting cognitive differences. The iPhone 3GS has achieved remarkable results in the European, American, Japanese and Korean markets, and its launch in the Hong Kong market has even triggered a buying frenzy."

"Given these conditions, major investment banks and risk institutions, including investors, would believe that the iPhone 3GS would also be popular in mainland China, and China Unicom's performance would increase significantly with the launch of the Chinese version of the iPhone 3GS."

"Um…"

Wang Mingxu nodded slightly.

“The difference in understanding lies here. I live in mainland China, and I know that the mainland does not yet have a complete 3G network application ecosystem. On October 30th, the mainland version of the iPhone 3GS was launched, and the 16GB version cost 6999 RMB. I realized that this was a marketing decision with a wrong price, so on November 2nd, my friend and I arrived in Hong Kong Island to fly.”

As Zhang Yang recounted the story, a look of surprise flashed across Wang Mingxu's eyes. He had never expected Zhang Yang to act so swiftly.

The price was set on October 30th, and short selling began on Hong Kong Island on November 2nd.

If it weren't for the weekend, he estimated that Zhang Yang would have arrived in Hong Kong Island on the night of the 31st, no, the 30th, and placed a short bet the next day.

insider trading?

does not exist at all!

It's impossible that China Unicom deliberately set a price of 6999 yuan so that Zhang Yang could profit from short selling, right?
After understanding the logic behind short selling, Wang Mingxu asked, "Jiangzhe Huaxin Securities Fuchun Road Branch, Galaxy Securities Changcheng Huimin Road Branch, and GF Securities Hudu Zhonghuan Road Branch are all your speculative trading seats, right?"

"These are seats we used."

Zhang Yang nodded.

"Then you should know that on today's A-share closing day trading data, these few seats appeared on the buy side of China Unicom, with an amount exceeding 9 million RMB. How do you explain that?"

The reason why Wang Mingxu and other leaders suspected Zhang Yang, Liao Guopei, Lin Guangchang and others of insider trading was because they had a bit of a betting logic.

On the same day the short positions were settled, they immediately went long again. Anyone who didn't know better would think there was collusion within China Unicom.

"Do you have to say it?"

Zhang Yang inquired.

"It's best to say it out loud. Don't worry, the recording won't be leaked," Wang Mingxu assured him.

"The recent five-day consecutive decline has wiped out the premium that the Chinese version of the iPhone 3GS brought to China Unicom. Even if China Unicom's stock price continues to fall, the downside is quite limited. In addition, its third-quarter report disclosed that its broadband business showed growth. Furthermore, the mainland is undergoing a transition from 2G to 3G networks, and the market is being reshuffled. This is my buying logic."

Zhang Yang answered truthfully.

"So, you think China Unicom will see growth in its 3G and broadband services?" Wang Mingxu asked again.

"Who doesn't like things that offer good value for money?" Zhang Yang retorted.

Compared to China Mobile and China Telecom, China Unicom's main selling point is its large volume of services; if the quality is lacking, it makes up for it with quantity.

"Okay, I understand."

Wang Mingxu turned off the recorder, then smiled and said, "When I see Mr. Bao in the mainland, please give him my regards."

"I will definitely bring it."

Zhang Yang responded politely with a smile.

Then, he tentatively asked, "Shall I get off the bus, Director Wang?"

"Just call me Brother Wang. Don't let my age fool you, I'm only 49 this year, haha." Wang Mingxu laughed heartily.

“He’s getting on in years,” Zhang Yang thought to himself, but on the surface he smiled and replied, “49 years old? If you hadn’t said so, I would have thought he was 39. Well then I won’t bother you any longer, Brother Wang. If there’s a chance, let’s get together again in the mainland.”

"OK."

Wang Mingxu nodded in response.

There's a social skill involved: if you really don't know how to compliment someone, you can compliment someone under 30 for being young and accomplished, or someone over 30 for being young.

The word "young" is something that older people love to hear, especially those over 60. Praising someone as young will surely make them very happy.

……

As dusk falls and twilight spills over Victoria Harbour, the afterglow paints the glass curtain walls of Central with a golden hue, creating a scene resembling a natural painting.

After a period of busy work, Liao Guopei and Lin Guangchang finally completed the settlement of options and short positions for 11 financial institutions.

Upon arriving at the agreed location, Zhang Yang took the receipts from the two men and began calculating the total amount.

Goldman Sachs made a profit of RMB 1.85327 million.

HSBC made a profit of 1.846 million Chinese yuan.

Morgan Stanley made a profit of 1.875 million Chinese yuan.

……

Taifook Securities made a profit of 1.833 million Hong Kong dollars.

Sun Hung Fund made a profit of 1.86 million Hong Kong dollars.

There were a total of 11 institutions, with each institution earning an average profit of RMB 1.85 million, for a total profit of RMB 20.35 billion, which is equivalent to HKD 23.1 billion.

How much in total?

Liao Guopei was somewhat impatient.

“HK$23.1 billion,” Zhang Yang replied, adding, “I plan to keep this money in Hong Kong Island to prepare for shorting Nokia.”

"what?"

"Short Nokia?"

Lin Guangchang and Liao Guopei were completely dumbfounded.

Shorting Nokia?
How dare they short the leading mobile phone company?
"Joker, you don't have some inside information again, do you? Don't tell me you have connections in the US." Liao Guopei was completely baffled.

“Nokia is Finnish.” Lin Guangchang corrected Liao Guopei, his eyes flashing with confusion as he asked, “What’s wrong with Nokia?”

"I'll keep you in suspense for now, but in short, it's best to keep this money in Hong Kong Island. If you need it urgently, you can transfer it back to the mainland at any time."

Nokia hasn't ruined itself yet, so Zhang Yang naturally wouldn't say that it would be eliminated by the market.

But one thing is certain: history will repeat itself, because there are already signs of this trend.

Liao Guopei thought it made sense and nodded, saying, "Since you say to put it on Hong Kong Island, then let's put it on Hong Kong Island. It can be used for international investment."

“That’s right. Foreign exchange controls don’t restrict entry. If it’s urgent, we can use it,” Lin Guangchang added.

They were unsure whether Zhang Yang possessed inside information about Nokia, but from a financial perspective, the HK$23.1 billion would have a far greater impact in Hong Kong than in mainland China.

Because of foreign exchange controls, this money can only be invested in mainland assets if it's in mainland China. However, if it's in Hong Kong, it can be invested in assets in any market around the world.

(End of this chapter)