"Huayin International actually entered the market to short, truly unexpected."
Facing the rapid drop of the British pound exchange rate back to the 1.5400 level, Godfrey in the trading department of 'Huifeng Global Asset Management Universal Hedge Fund' showed a clearly surprised expression, but a small 70-point pullback did not reveal any nervousness in his heart.
After all, even though the main hedge fund product he managed had added many long positions in the exchange rate range above 1.5400, the fund's current overall long positions were still in a state of significant floating profit.
Moreover, he anticipated that the shorts in the market would launch a desperate counterattack.
"Huayin International's entry is indeed a bit surprising,"
Gerald, the head of the fund trading team, responded,
"But what's even more surprising… should be the amount of cash reserves held by Huayi Capital. Everyone thought that this institution's short positions were on the verge of liquidation, but they still have hundreds of millions of dollars in cash reserves, which is completely different from the information we investigated before!"
Godfrey, seeing Gerald mention this, slightly frowned and said,
"The amount of cash reserves held by Huayi Capital is indeed far from our previous investigation data. It seems… this President Su really has something, managing to raise several hundred million dollars in such a short time."
Gerald said,
"The position proportion of 'Huayi Chengyuan No. 1' Hedge Fund is completely different from what we predicted before…
Currently, it seems unlikely to force this fund to stop loss on a large scale, or even liquidate. This will stimulate many long investors in the market to abandon their previous goals and take profit by closing positions, right?
If other major long funds in the market do not continue to squeeze shorts, Mr. Godfrey, the pressure for the British pound exchange rate to break upwards will likely become extremely high, and the shorts will instead have a significant opportunity to counterattack."
"The underlying logic of the British pound's appreciation has never been Huayi Capital's shorting. Naturally, its trend will not change because Huayi Capital obtained new capital injections through short-term fundraising and reduced its position risk.
Furthermore, major short institutions in the market are collectively releasing so much information. By using various unverified, or even groundless speculative fake news to influence market sentiment.
This precisely indicates that the shorts in the market can no longer withstand the pressure of the market's continuous upward movement, which can be seen from the rapid reduction of short positions in the market earlier.
The market trend is very strong. Even if Huayin International chooses to enter the market to short at this time, it would be difficult to reverse the market on its own.
What's more…"
Godfrey said.
Godfrey paused here, then continued:
"In my opinion, Huayin International's entry will further stimulate more large asset management institutions to enter the market to go long, hunting this well-funded Chinese institution."
Gerald said,
"It's not just Huayi Capital and Huayin International releasing news to the market. Many media outlets under the Aberdeen Asset Group are also constantly hyping up the changes in the long-short situation in the British pound exchange rate market, guiding short capital to enter.
These media organizations making such a move…
This contradicts the information we previously obtained about the dissatisfaction of Aberdeen Asset Group's senior management with Mr. Frederick, the fund manager of 'Evolution No. 1' Hedge Fund, who manages tens of billions of dollars.
Furthermore, the statements from these media organizations fully indicate that Aberdeen Asset, in its internal expectations and views, is clearly bearish on the future trend of the British pound exchange rate.
Aberdeen Asset, as one of the top ten asset management institutions globally, manages nearly a trillion dollars in assets.
If they are firmly bearish on the British pound exchange rate. Once the 'Evolution No. 1' main hedge fund managed by Mr. Frederick enters a position risk phase, it will definitely be supported.
Moreover, such a large asset management institution being bearish and shorting the British pound exchange rate.
It will also have a huge impact on market sentiment, inducing many long funds in the market to reduce positions, and enticing many follow-the-trend funds to enter the market to short."
Godfrey said,
"No matter, although Aberdeen Asset Group's internal actions are somewhat unexpected, we had anticipated this before. Who else are the main short institutions in the current market besides Huayin International, Huayi Capital, and Aberdeen Asset?
Overall… the short power in the market at this time is still relatively very weak. Once the emotional reaction passes and everyone returns to rationality, the bulls will regain the absolute advantage, and the British pound exchange rate will quickly recover lost ground as before.
What's more, with the Bank of England stabilizing the exchange rate from behind. With the Bank of England still having many cards to play to stabilize the exchange rate, shorts in this position, even if they shout themselves hoarse, won't be able to stir up any significant waves."
"Then… according to Mr. Godfrey's strategy…"
Gerald paused and asked,
"Are we still following our original trading strategy, firmly going long, and continuing to squeeze shorts?"
Godfrey nodded and said,
"Yes, continue to go long. In my opinion… this counterattack by the shorts is merely a desperate last stand by these few major short institutions in the market."
Following their analysis and discussion of the rapidly changing market exchange rate.
At the same time, there were quite a few major long institutions in the market who shared Godfrey's views.
Among them, Tianhe Capital Trading Department.
Upon hearing the news of Huayin International entering the market to short, Gu Chijiang indeed panicked at first.
But after calming down, he understood that this was a desperate counterattack by the shorts and would not change the trend of the British pound exchange rate.
So he chuckled, greedily following the two major long institutions in the market, 'Huifeng Global Asset Management' and 'Mitsui Sumitomo Investment Company', continuing to go long and open more long positions.
On the other hand, far across the ocean, at Barclays Bank's foreign exchange trading center in London's financial district.
After seeing the British pound exchange rate shorting analysis report published by Su Yi on the external network, along with his declaration of war against all long institutions in the market, and numerous bearish reports from the US-funded institution 'Aberdeen Asset', Claude, the fund manager of 'Lion International' Hedge Fund, instantly began to waver in his original bullish conviction.
"Alex, regarding the nationwide Brexit referendum on the 23rd, is there any important market information we've missed?"
Claude gazed at the large number of long positions held by the hedge fund he managed on the main computer, then turned to Alex, the head of the market analysis department, and asked,
"Have the preliminary research reports and result prediction data for each city regarding the referendum on the 23rd been collected?"
Alex responded,
"The central bank has indeed been conducting market operations recently, and its determination to stabilize the market exchange rate is evident. Apart from the Brexit protests in Scotland in recent days, there has been no other important market news. Based on our institution's preliminary survey, voting result predictions, and model calculations, the referendum result on the 23rd will not come as a surprise."
Claude said,
"But in my heart… mI always feel a bit uneasy!"
Alex said,
"Could it be the weather, not sleeping well lately? London's weather has been changing rapidly recently, feeling significantly different from previous years."
Claude waved his hand,
"It's not the weather. Ever since the Brexit referendum proposal was passed by the cabinet, I felt that things were developing somewhat off track.
Now… in a clearly bullish market, institutions like Huayin International and Aberdeen Asset openly shorting is even further off track. According to normal logical reasoning, shorting in a market where longs clearly have an absolute advantage should be extremely risky.
Large asset management institutions like Huayin International and Aberdeen Asset would absolutely not disregard risk to intervene heavily. But now, these two institutions are not only intervening heavily but are also full of confidence, which makes one have to be vigilant."
"However, according to our team's research and information gathering, there has indeed been no news in the market recently that could significantly impact the trend of the British pound exchange rate. Currently, most major domestic financial institutions are bullish on the exchange rate market."
Alex said.
Claude chuckled and said,
"It's precisely because most people are bullish that I feel uneasy. You know, financial markets are mostly reflexive. Alas, since I'm not at ease, it's better to reduce some long positions first.
Half a century ago, the renowned market speculator Livermore once said that when you feel lost and uneasy about the future profit and loss of your current positions, the best strategy is to trust your intuition and reduce those positions that make you uneasy."
With that, Claude immediately turned around and instructed the trading teams in the trading room to reduce some long positions.
And as Barclays Bank's 'Lion International' Hedge Fund began reducing its long positions and covering the corresponding long positions.
In the British pound exchange rate market…
The British pound exchange rate, which had originally fallen to the 1.5400 mark and was fluctuating, further plummeted, breaking through the 1.5400 support level, and rapidly slid to around 1.5350 before stabilizing again.
And with the British pound exchange rate sharply dropping 100 points from its high within half a day.
The number of short positions in the market also quickly broke through the million-lot mark once again, and the gap with the number of long positions narrowed to within a million lots.
However, despite the market board.
The shorts achieved a temporary victory in their full counterattack.
However, when market trading hours shifted from the European session to the more active American session.
After numerous speculative intraday long traders in the market either took profit or stopped loss, meaning when the number of long positions being covered began to decline, the British pound exchange rate once again started to oscillate upwards, recovering lost ground.
"What did I say? This is just the shorts' death throes, a wave of bear traps."
During the American trading session, in New York, Wall Street, at the headquarters of 'Navigator Capital' Group, in the 'Amanda' Hedge Fund trading room, fund manager Cedric said with a smile, seeing the British pound exchange rate rebound from its bottom.
"It can't be called a bear trap,"
Guy, the head of the hedge fund asset management business in the group's investment department, said in the trading room.
"Mr. Frederick of Aberdeen Asset should not be underestimated. The battle between longs and shorts in the British pound exchange rate market has not yet been decided."
Cedric chuckled and said,
"Frederick? He's just okay. Last time, during the 'Swiss Franc Black Swan' event, if not for his good luck, the 'Evolution No. 1' Hedge Fund he managed would have probably been annihilated and ceased to exist.
This time, he's actually thinking of shorting, waiting for another 'black swan' event to appear. How many 'black swan' events can there be in the market? This round of Brexit referendum, no matter how you look at it… is just a procedural formality; a true Brexit result is simply impossible.
But then again… since some people want to bet on such a low-probability event, taking this opportunity to harvest a wave of shorts in the market isn't so bad."
"Do you want to continue going long?"
Guy asked.
Cedric nodded slightly and replied,
"The short counterattack and catharsis are complete. Most of the intraday long positions that needed to be covered have now been covered. The market's net long positions have also fallen from over a million lots intraday to around 900,000 lots. If we don't continue to go long now, when will we?"
Having said that, he didn't wait for Guy's response.
He directly issued trading instructions to the traders to continue increasing positions and buy long on the British pound exchange rate.
At the same time he issued the trading instructions, in the trading department of 'Blackstone Investment Global Asset Management' on Wall Street, Humphrey, a foreign exchange market hedge fund manager, received a call from Frederick at the 'Aberdeen Asset' branch in Hong Kong City, across the ocean.
"Hey, old friend, I heard you're going long on the British pound exchange rate,"
Frederick asked on the phone.
Humphrey replied,
"Yes, I didn't expect us to become counterparties this time."
Frederick said,
"As a competitor, I welcome you as my counterparty to go all-in on longing the British pound exchange rate. But as a friend, I feel it is my duty and necessary to warn you about the huge risks of longing the British pound exchange rate at this time."
"Huge risks of longing the British pound exchange rate? I don't think so."
Humphrey said with a smile.
Frederick said,
"My friend, I'm not trying to convince you. I just want to show you a recent data report from our institution regarding the intentions of numerous citizens in major cities across the UK concerning the referendum results on the 23rd."
After speaking, Frederick sent a data report to Humphrey's email.
Humphrey opened the email, glanced at the internal data provided by Frederick, and for a moment, was completely stunned, asking,
"This… is this real or fake?"
Frederick replied,
"If you think it's real, then it's real. If you think it's fake, then it's fake. From my personal point of view, I believe we have all misjudged the outcome of the referendum. Looking solely at the poll data for London and its surrounding cities, the public's vote intention for Brexit is indeed much lower than for remaining. But the entire UK is not just a few major cities…"
Since his first private meeting with Su Yi and hearing his analysis.
Frederick secretly had Aberdeen Asset Group's market strategy department use various connections to conduct a market sampling survey across major cities, non-core cities, and regions throughout the UK.
The coverage was not extensive, but the actual deviation would not be small.
Originally, he thought the final survey results.
Between the views of Brexit and remaining, should have been infinitely close to 50%.
But when the data was truly compiled, the final outcome completely astonished him.
And this was the fundamental reason why he later firmly shorted the British pound exchange rate and also received full support from other departments within the group.
"If it's real, then I'm afraid I'll have to change my current trading strategy,"
Humphrey said.
(End of chapter)