Los Angeles time is 15 hours behind Hong Kong.
Thus, when gold fell to 175 USD per ounce on the morning of April 7 in Los Angeles, it was already late at night in Hong Kong. Li JiaCheng only learned the next morning that gold had dropped to 175 USD overnight — and now had fallen even further.
After breakfast, Li JiaCheng immediately contacted Feng JinXi, and the two met to talk.
Li said: "Brother Feng, Hutchison Whampoa's futures entry price was 188 USD per ounce. Now gold has fallen below 175 USD — about a 7% drop. With five‑times leverage, that's a 35% loss on principal, around 220 million HKD."
"Nearly a tenth of Hutchison's market cap gone. We can act!" Feng said gravely, already decided.
Li continued: "Gold may not yet have hit bottom, but we must guard against a rebound. We can't wait."
"You're right, Brother Li. Opportunity lost will not return," Feng agreed. Then he looked seriously at Li: "The most important thing now — are you certain Hutchison is long on gold futures, not short? If they're short, they're profiting. Shorting Hutchison's stock then would be suicide."
Li assured him: "Rest easy, Brother Feng. I'll short alongside you. I wouldn't deceive you."
"My worry isn't deception, but that you've misread the situation," Feng said, shaking his head. Shorting Hutchison required tens of millions HKD, maybe more. He had to be cautious.
"I've considered that," Li smiled. "This short will require heavy capital. So I plan to have Hutchison's major shareholders question the company's gold futures position. Stirring things up will reveal whether they're long or short."
"Moreover, if possible, I want to ally with those shareholders to short together. With their holdings, once we short and they suddenly dump shares, panic will spread and the price will plunge."
"If Hutchison truly is long, those shareholders will want to exit early, maybe even profit. Brilliant idea!" Feng applauded. Cooperation with foreign capital didn't bother him. Money was money, and he believed Hutchison's British shareholders thought the same.
Li felt pleased, though he hid it. He remarked: "Hutchison used HSBC's financing channel. Unfortunately, the sum is large. HSBC won't reveal details — it would damage their reputation. If only we could learn from them, it would be easy."
"1.5 billion USD principal, five‑times leverage. Only a few HSBC executives know the details. They'll never leak it. Reputation is everything," Feng agreed. Even close allies of HSBC, like Bao YuGang, would get only vague answers.
For a bank, reputation was paramount. Especially for a giant like HSBC, they would never risk it.
Li said: "Today is Saturday. Nothing can be done. Perfect time to contact Hutchison's major shareholders."
"And time to raise funds," Feng added. His fortune wasn't enough to casually put up tens of millions. He had to calculate how much to commit and how to minimize risk.
"I'll get busy then. Brother Feng, wait for my news," Li said eagerly. For him, shorting wasn't just profit — it was a chance to strike Hutchison, and by extension its major shareholder Lin BaoCheng, a heavy blow.
Even if Hutchison's falling stock didn't affect Lin's control, it would hinder the company's growth. And Li believed their gold futures losses were already severe.
Li first contacted Niu BiJian of Jardine Matheson. He hoped Niu could use Jardine's ties with HSBC to learn Hutchison's investment details. Moreover, Jardine was one of Hong Kong's great trading houses. If they sold shares, signaling lack of confidence, it would sway many investors to sell.
Niu hadn't known Hutchison's specifics — Jardine held only 3%. Busy with Bao YuGang's attack on Wharf, he hadn't cared. But after Li explained, he asked Jardine's board representative at Hutchison and learned the truth.
Discovering Hutchison was long, Niu immediately agreed to cooperate — but with conditions. Jardine must first sell its shares. In return, he would rally two other major shareholders to challenge Hutchison's board, and publicly express doubt about Hutchison and dissatisfaction with chairman Lin BaoCheng.
Li accepted. With Jardine's help, things would go much smoother.
Niu also promised to contact the Qi DeZun family and Bob, two other major shareholders, to unite in shorting. At minimum, they would sell their holdings, driving Hutchison's price down.
Though such mass selling made shorting via the secondary market impractical — too many shares to dump at once — they could short through warrants, buying put options. The only question was whether enough capital would take the other side.
For every put, there must be a call. Without sufficient counterparties, shorting wouldn't work.