"But Meng, have you ever considered that with the Bank of England forcibly propping up the market and maintaining the pound exchange rate through open market operations, the longs who already have an absolute advantage in the market could further consolidate their positions to squeeze shorts, which would also cause continuous short squeezes and stampedes, thereby triggering extreme upward volatility in the pound exchange rate?"
Kong Fansheng said,
"In fact, at this point, whether you're going long or short, the risk is extremely high."
"Manager Kong's words are quite mistaken,"
Su Yi replied with a smile.
"At this moment in the pound exchange rate market, the risk of going short should be far less than the risk of going long.
Firstly, the public speech by a key Federal Reserve figure last night has already signaled market expectations of future interest rate hikes.
The increased expectation of a US dollar interest rate hike will clearly put immense upward pressure on non-US dollar currencies, suppressing further appreciation of the pound exchange rate.
Secondly, the Bank of England's foreign exchange reserves are not abundant.
Given that the pound's exchange rate is still within their acceptable range and the market is slightly biased towards long positions, the Bank of England will not inject too much foreign exchange into the market to stimulate the pound. Most likely, they will just shout slogans to stabilize market confidence.
Furthermore, major exchanges and market makers have already made corresponding adjustments to the leverage multiples and margin ratios for pound exchange rate trading.
Under these circumstances, long institutions in the market. If they want to further drive up the pound exchange rate and squeeze shorts, the amount of capital required will be at least five times greater than before.
Moreover, given the extremely large net long positions in the market, with many long holders having certain unrealized gains and a strong desire to take profit and close positions. It's likely that few long institutions would be willing to continue investing such a massive amount of capital to support other long-position investors.
Of course, the most crucial factor is that within the UK, specifically in Scotland, numerous pro-Brexit protests have emerged. Many cities and regions that institutions previously expected to support the UK remaining in the EU system now show public opinion trends that clearly deviate from institutional forecasts.
In other words, judging from current signs... The probability of a 'black swan' event where the UK referendum passes Brexit is clearly increasing. Everyone knows that in financial markets, price changes primarily stem from shifts in expectations and emotional feedback.
Since market expectations have already changed compared to before, and simultaneously, the pound exchange rate has rebounded by nearly 1000 points from its low. Then, in the pound exchange rate market at this time. The path of least resistance for price movement is the short direction.
In this situation... Once the long institutions in the market try to forcefully go long and squeeze shorts, and greedily attempt to 'eat the cake' of forcing shorts to stampede each other, I believe they will pay a heavy price."
"Since CEO Su believes that the long-short situation in the pound exchange rate market is shifting, and market long-short expectations are turning bearish, why did CEO Su approach our 'Huayin International' institution, hoping that we could participate in the market, go short, and help resist the continuous short squeeze from the longs in the market?"
Kong Fansheng continued with a smile,
"I presume CEO Su isn't entirely confident that his short positions can hold until a complete reversal of market expectations and the day the UK referendum on Brexit results are announced on June 23rd, right?"
Su Yi replied,
"I do have concerns in that regard. After all, our institution's capital size is still too small, far incomparable to these large asset management institutions in the international financial market."
"Capital in the financial market is the most greedy,"
Kong Fansheng said.
"I can almost certainly say that with the Bank of England propping up the exchange rate, these long institutions that have already made considerable profits and tasted a lot of sweetness in the market will definitely continue to squeeze shorts in the coming period, forcing CEO Su and other major short institutions in the market to deplete their capital, be forced to stop-loss and close positions, thereby causing a short stampede and seizing the market's most lucrative expected profits."
"Hmm, I think so too,"
Meng Shengfei nodded slightly, paused, and then added,
"But CEO Su, you just said... your institution has ample capital reserves, so why are there rumors circulating everywhere in the market now that your institution's reserves are almost depleted and you are facing forced stop-loss to cover positions, or even liquidation?"
"That's just false information I deliberately released,"
Su Yi replied with a smile.
"Deliberately released false information?"
Meng Shengfei's heart jolted.
Su Yi nodded and said,
"It's like fishing; there must be bait close at hand for the fish to bite. Our 'Huayi Capital' institution is that bait, tempting the longs in the market to continuously squeeze shorts, wanting to burst the shorts and seize excess profits."
"Tempting the longs to continue squeezing shorts?"
Meng Shengfei was even more surprised, saying,
"CEO Su, your audacity is truly admirable. Are you trying to get the major long players in the market to invest massive amounts of capital at this relatively high pound exchange rate to squeeze shorts, thereby getting them deeper into the market and triggering larger-scale potential extreme market conditions?"
"Manager Meng understands best,"
Su Yi smiled.
"You're walking a tightrope,"
Kong Fansheng said.
"Using yourself as bait, one wrong step and you could end up liquidated, losing everything."
"Well, it's the financial trading market, isn't it? High profits always come with high risks,"
Su Yi calmly replied.
"I, on the other hand, find CEO Su's 'lure the enemy deep' strategy quite brilliant,"
Meng Shengfei said.
"In the pound exchange rate trading market right now, the leverage multiple for opening positions has been lowered, and the margin ratio has also increased. If longs want to continue squeezing shorts, they will inevitably have to invest several times more capital than before.
And continuously going long at a high position will first increase their own holding costs. Holding an excessively large long position when they eventually want to close their positions and exit, more counterparties will be needed to take on those positions.
In other words, the larger the long positions these long institutions hold, the more severe the suppressive effect on the pound exchange rate will be when they try to cover their positions.
In this situation, unless they bust the shorts in the market, they probably won't be able to exit safely. If we add the factors CEO Su just analyzed, once the market's expected direction and market sentiment truly shift towards being bearish.
Then, the nearly 800,000 net long positions in the market at this time will instantly turn into 800,000 units of short power... If that volume comes crashing down, the longs in the market will likely inevitably collapse and stampede."
"It sounds... indeed like a good strategy."
Zhang Yanshun, who had been listening to the three converse, pondered for a moment, nodded with a smile, and said,
"It seems CEO Su had everything planned out long ago and is confident about market changes and future shifts in expectations."
Su Yi replied,
"I wouldn't say I'm completely confident, but I believe that at this current level, the risk-reward ratio for shorting the pound exchange rate is already quite high."
"CEO Su wants us to get involved, presumably to use us as bait to entice the longs to continue squeezing shorts, right?"
Kong Fansheng, after pondering for a while, also said,
"It is indeed a brilliant strategy. Once the holding costs of the long institutions in the market are continuously driven up, reducing their unrealized gains while their position size continues to increase, then... these major long institutions will indeed find it difficult to exit if they don't burst the short positions.
And the UK's nationwide referendum on Brexit is in ten days. At most, there are less than ten trading days left. During this period, as long as we withstand the continuous short squeeze from the longs, making the long institutions in the market sink deeper, then a market reversal in sentiment and expectations can truly be anticipated."
He had previously somewhat underestimated Su Yi.
But now, having heard Su Yi's entire short-selling plan and strategic scheme, he began to look at this young man in a new light.
"Exactly,"
Meng Shengfei said with a smile,
"I, for one, think CEO Su's strategy is completely feasible."
"Currently, the total long and short positions in the entire pound exchange rate market have reached nearly 3 million lots, haven't they?"
Zhang Yanshun thought for a moment and said,
"Such a massive volume of long and short positions is already a precursor to an extreme market outbreak. If the long and short position sizes in the market continue to increase, the consequences of a long or short stampede, and the extreme market volatility it would cause, would truly be breathtaking."
"With this volume of long and short positions, once the long and short forces become completely imbalanced, the pound exchange rate will have at least 2000 points of fluctuation potential, whether upwards or downwards,"
Kong Fansheng predicted.
"Such extreme volatility, if one gets the direction right, can indeed yield several times, even dozens of times, the exorbitant profits."
"Haha... It truly seems to be high risk, high reward,"
Zhang Yanshun laughed.
Meng Shengfei responded,
"High profits are definite, as for high risk, entering the market to short at this point, in my opinion... isn't all that high risk.
However, it can certainly be foreseen that this time, the pound exchange rate market will definitely erupt in a global-shocking long-short battle, and it will certainly unleash more violent extreme market volatility than last year's 'Swiss franc black swan' event."
"CEO Su's strategy should be fine. However, our 'Huayin International' is not like 'Huayi Capital' under CEO Su's management. Participating in global financial markets, especially large-scale investment operations in the highly risky forex market, requires many procedural approvals."
Zhang Yanshun said.
"I know and understand that,"
Su Yi replied.
"However, the strategy you just outlined is indeed excellent. I'll try to get approval from the leadership above. If there are no issues, I'll have Kong from Investment Department One and Meng from Investment Department Two cooperate with you to fight a spectacular long-short battle in the pound exchange rate market."
Zhang Yanshun said.
Su Yi heard Zhang Yanshun's words, a clear smile appeared on his face, and he said,
"Thank you, CEO Zhang, for your trust."
Zhang Yanshun chuckled,
"Everyone says that our Chinese capital institutions in the international financial market are only harvested by 'Wall Street' capital and these foreign institutions, big and small, from abroad. They say our Chinese capital in the international financial market is meat on a chopping block, to be slaughtered at will.
This time... I hope CEO Su will show these arrogant guys how we harvest them, and I also hope CEO Su can establish the momentum of our Chinese capital institutions in the international financial market."
"CEO Zhang, rest assured, it will definitely happen,"
Su Yi said firmly.
Things have developed to this point...
This is no longer his personal gamble, nor is it just about his individual interests or reputation.
However, knowing the established historical trajectory and having the support of tens of millions of people across the UK, he believed that this time, as long as the major long players participating in the pound exchange rate market, no matter how they scheme or struggle, would ultimately... inevitably face the fate of liquidation and ruin.
"Alright, have some food, the dishes are getting cold,"
Ms. Li said with a smile, seeing that after continuous discussion, everyone's opinions finally converged.
"I still have about 300,000 US dollars. When I get back... I'll also support with a few short orders."
Fang Wanqing, who had been patiently listening, now turned her gaze to Su Yi and said with a smile,
"CEO Su, everyone is on your side this time, so you absolutely must win!"
Su Yi said with a smile,
"Don't worry. I guarantee that when the time comes, your 300,000 US dollars will instantly turn into 3 million US dollars."
Fang Wanqing chuckled,
"You said that. If it's less than 3 million US dollars when we exit, I'll make you compensate me."
"No problem,"
Su Yi said.
As a reborn person, knowing the course of history and holding all the cards, if he could still be crushed by the longs in the market, he might as well just crash and die.
After discussing business, everyone chatted and finished their meal.
Around 8:30 PM, they left the restaurant and dispersed.
"Wanqing, do you really trust this kid surnamed Su so much?"
On the way back, Ms. Li held Fang Wanqing's hand tightly and asked,
"This is a huge gamble. If we win, everyone will naturally be happy. If we lose, this kid... will very likely be doomed forever."
Fang Wanqing nodded firmly and said,
"From what I know about him, he wouldn't bet without absolute certainty, let alone gamble all his assets, a massive bet of billions of yuan? So... I believe he will definitely win this time."
Ms. Li let out a soft breath and said,
"I hope so. Otherwise, as his guarantor, I'm afraid it wouldn't be easy for me to extricate myself."
She and Su Yi had met twice in total so far.
From her personal observation, she felt that Su Yi possessed an extraordinary demeanor.
At the very least, in her decades of experience, she had never seen a young man in his twenties who could bet all his chips and still remain calm, chatting and laughing freely.
After all, that was billions of yuan in funds.
Even for herself, despite having weathered many storms.
If she were to truly invest such a large amount of capital, facing an uncertain future and a fund account fluctuating by millions every minute, she would not be as calm as him.
This sufficiently demonstrated that he was a person of firm resolve, extremely confident in his investment abilities and trading skills.
If such a young man succeeded, she felt he would be a perfectly suitable match for her niece.
This was also the fundamental reason why she agreed to Fang Wanqing's request, using her connections to help him and providing him with a credit endorsement.
(End of chapter)