"Haha, Mr. Su is right."
Hearing Su Yi's confident words, feeling certain of victory, Meng Shengfei was greatly encouraged, laughed loudly, and praised, "We should press on with the advantage, directly crush the long main forces in the market. As long as the market forms a situation of long-selling-long, creating a unilateral bearish trend, even if the Bank of England intervenes, it won't be able to go against the combined direction of the entire market to force support."
"Under millions of long and short open orders, the Bank of England is also powerless to influence the development of the market trend."
Kong Fansheng paused at this point and responded, "Once a unilateral long-selling-long trend forms, no one can stop it. And currently... we are just one step away from the formation of such a unilateral trend."
"We can't be too optimistic either." Frederick still said calmly, "It seems that the uncertainty surrounding tomorrow's referendum result is still very high."
"Mr. Su... the GBP exchange rate movement has started to stabilize around the 1.4800 level."
As they discussed, Qu Zecai, who had been monitoring the GBP exchange rate changes and the profit and loss of the fund's positions, reported instantly, "Should we appropriately reduce our positions at this level to lower our overall holding costs and increase our risk tolerance for our positions?"
Su Yi thought for a moment and said, "There's no need. Given the current market expectations and trend, it should be difficult for the GBP exchange rate to return to the large oscillation range of 1.5000 to 1.5400 before tomorrow's referendum results are officially released."
"Then should we further increase our positions?" Qu Zecai continued to ask.
Su Yi smiled and replied, "Not necessarily. As Mr. Frederick said... the unilateral trend in the market has not fully formed yet. Although the GBP exchange rate has broken through the previous large oscillation range platform.
However, many intraday speculators in the market still mostly hold the view of a volatile trend. This means that at the current GBP exchange rate level, without new negative market stimuli, there will definitely be a large number of intraday short speculators taking profits.
At the same time, the main long institutions in the market, who were just somewhat bewildered by the sell-off. Will also take advantage of the situation where intraday long speculative stop losses are mostly completed, and a large number of intraday short speculators have a strong demand to take profits and exit.
To launch a quick counterattack and recover some of the huge losses caused by the sharp fall in the GBP exchange rate.
In other words... Since the current GBP exchange rate trend has a demand for a rebound and pullback, we are not in a hurry to aggressively increase positions and short at this level. After the longs in the market continue to cover some of their positions and the shorts extensively close out their positions.
That is, after the short-selling momentum in the market has further matured, we will then further increase our short positions. The opportunities will be much better than now."
"Hmm, I agree." Meng Shengfei nodded in response, "Nothing can be achieved overnight. At this point, there are no new negative market stimuli, and market sentiment has largely been vented. In this situation, stubbornly continuing to increase short positions will not only fail to yield good results but will also cause us to lose our current market initiative."
"Next... we'll see how strong the counterattack of the market's long forces will be," Kong Fansheng said.
"If the Bank of England remains hesitant, the counterattack from the long forces probably won't be very strong," Frederick said. "Once confidence is lost, rebuilding it will be several times harder than before."
"Indeed," Meng Shengfei said, "Otherwise, why do they say that in financial markets, confidence is more important than gold?"
"Ah, you know what, currently, spot gold and the GBP exchange rate have truly formed completely opposing trend patterns," Kong Fansheng said. "It's estimated that many major institutions from various global capitals have simultaneously established huge hedge positions in both the GBP exchange rate and spot gold."
"This is to be expected," Su Yi said, "But the main battlefield for longs and shorts will definitely still be on the GBP exchange rate."
"Mr. Frederick, the black market GBP exchange rate has crashed to around 1.4300," Adrian, Frederick's assistant and also the head of the Market Information Department for the 'Aberdeen Asset Evolution No. 1 Hedge Fund' product, reported at this time. "Furthermore, the run-on selling by various global capitals is continuing, and there are no signs of the Bank of England continuing to sell its US dollar reserves to save the GBP exchange rate."
Frederick heard Adrian's report, nodded slightly, and said, "After such a long time, the Bank of England still hasn't made any new moves. This should be sufficient to show that the Bank of England, constrained by the uncertainty of tomorrow's referendum results, has indeed changed its trading strategy and given up on stubbornly defending the GBP exchange rate."
"Haha... The Bank of England has abandoned the exchange rate. This time... the European capital that followed the Bank of England in massively going long on the GBP exchange rate, especially several large local British capital institutions and financial companies, are probably going to be greatly disappointed," Meng Shengfei laughed joyfully.
"I really want to see the expression on Godfrey's face, who is currently in charge of the 'Huifeng Yuanyu No. 1 Hedge Fund' product and is firmly long on the GBP exchange rate. This guy had been heavily bullish on the GBP exchange rate on various occasions before.
And relying on Huifeng Bank's deep pockets and strong backing, he was completely unfazed, claiming he could invest tens of billions of dollars to go long. I wonder if this guy still has the guts to say that now. Does he still dare to hold onto his massive 400,000-lot long position without reducing a single lot, until tomorrow's referendum results are released?"
"I'm afraid the 'Huifeng Yuanyu No. 1 Hedge Fund' managed by Godfrey has already reduced positions and stopped losses on many of them, right?" Kong Fansheng said. "The market situation has taken a sharp turn for the worse. As a seasoned fund manager, even if the underlying logic of the trading strategy hasn't changed, when market movements exceed previous expectations and plans, one should still respect market trends and implement corresponding stop-loss remedies."
"Hard to say," Su Yi said, "In financial markets, correcting mistakes instantly is not that easy."
Sure enough, as Su Yi had predicted...
Just as the fund managers of the three linked major short institutions, 'Huayi Capital', 'Huayin International', and 'Aberdeen Asset', all breathed a sigh of relief, clearly delighted with the GBP exchange rate movement.
In the trading department of 'Huifeng Yuanyu No. 1 Hedge Fund', also in Hong Kong City.
Godfrey, as the manager of this main hedge fund, was full of anxiety, continuously asking Jeremy, the head of the market intelligence department, for the latest relevant news.
Due to his firm belief in going long on the GBP exchange rate.
And also due to his firm belief that the Bank of England would continue to invest massive funds and deploy large-scale US dollar foreign exchange reserves to maintain the GBP exchange rate trend.
The main fund product he managed.
Despite holding a massive long position of 400,000 lots, when the GBP exchange rate sharply plummeted and rapidly broke through the 1.5000 support level, he didn't manage to reduce or close out even a single long position.
This resulted in the floating loss of the GBP long positions held by the main fund product he managed reaching almost 500 million US dollars.
"No, the Bank of England still hasn't made any new trading deployments," Jeremy said. "There are no new preliminary vote counting results regarding tomorrow's referendum either. It's estimated that further clarification of the news... will only come once the official referendum begins tomorrow."
"If we really wait until tomorrow's official referendum begins, then everything will be too late," said Ernest, the head of the Market Research Department. "The market has already started to shift completely from long to short, Mr. Godfrey... My suggestion is that at this point, while the fund's losses are still within an acceptable range, we should first reduce some long positions to control holding risks. What do you think?"
Godfrey glanced at Ernest, then his gaze returned to the GBP exchange rate trend.
After a moment of contemplation, he said, "We have already missed the best opportunity to reduce positions. At this point, the short sentiment in the GBP exchange rate market has been fully vented, and there's not much need to reduce positions and stop losses anymore."
"Hmm, I agree with Mr. Godfrey," Gerald, the trading team leader, quickly responded. "Although the preliminary vote counts from major Scottish regions like the Shetland Islands, Orkney Islands, and Outer Hebrides were largely unexpected by institutions, overall, tomorrow's referendum result is still highly likely to lean towards remaining in the EU.
In other words, the underlying logic of our trading strategy has not changed. The reason why the GBP exchange rate plunged by several hundred points in the past hour or two was primarily due to emotion, coupled with the intentional actions of the main short institutions in the market.
I observed the changes in long and short positions across the entire market, especially the position changes of major global institutions. I found that while the number of long and short positions changed dramatically, the changes in the holdings of the main institutions were not significant.
Currently, under the brief negative stimulus and the deliberate guidance of various major short institutions, the short-term market sentiment for the GBP exchange rate has already been fully expressed.
For many short-term intraday speculative funds, longs have generally completed their stop-losses. While shorts are massively taking profits and covering. This means that in the current GBP exchange rate market, the potential for further selling pressure is far less than the potential for a rebound.
In this situation, we absolutely cannot be influenced by market sentiment at this level and conduct large-scale liquidation and stop-loss operations. If we were to do that... That would be helping our opponents suppress the market, which is completely disadvantageous to us."
"But analyzing the market trend, the GBP exchange rate has essentially broken through the previous oscillation platform range," Ernest said. "This means the GBP exchange rate has chosen a downward breakout. If at this time we blindly judge short-term intraday sentiment changes, thinking of waiting for the GBP exchange rate to quickly rebound significantly to reduce losses before appropriately cutting losses, what if we encounter new negative market news and the GBP exchange rate deviates from technical trends, falling further directly, continuing to break through the 1.4500 support level? The consequences... would be unimaginable."
"It shouldn't," Gerald said. "At this point, the market no longer has the momentum to fall further."
"It shouldn't?" Ernest chuckled lightly. "That's not the kind of judgment and strategic logic a seasoned trader should have."
"Alright, no need to argue," seeing the significant disagreement among the team, Godfrey continued to ponder for a while before raising a hand to interrupt the debate between the two sides, saying, "The overall trading strategy will remain unchanged for now; let's continue to hold positions and observe... That young man surnamed Su from Huayi Capital can withstand hundreds of millions of dollars in losses and hold his massive short positions firmly. What do we have to be afraid of?
Since we chose to enter the market at this critical juncture of the Brexit referendum. And decided to gamble big on this long-short battle. Then, at a critical moment, we cannot back down, nor can we waver in our confidence to hold positions, because once confidence is shaken, it becomes very difficult to truly and correctly judge the market's direction, and difficult to analyze the fundamental changes in its logic.
In financial markets, if you can't withstand losses, you naturally can't hold onto profits. I don't believe the Bank of England can completely abandon the forex market and the GBP exchange rate. I don't believe this referendum, which is clearly a farce, can truly evolve into a Brexit.
After all, among current senior UK government officials. Remaining in the EU and staying tied to the EU economy is what best serves their fundamental interests."
"But what if, going forward, the GBP exchange rate trend further exceeds our expectations..." Ernest paused and added, "What if the GBP exchange rate rapidly breaks below the 1.4500 support level again? You know... the black market exchange rate is still crashing!"
Godfrey gritted his teeth and said, "If the upcoming GBP exchange rate trend continues to deviate from our expected direction, if the GBP exchange rate substantially breaks below the 1.4500 level, then we will implement a large-scale, concentrated stop-loss according to your strategy."
"Alright," Ernest nodded, sighing helplessly.
Godfrey knew that by defiantly remaining bullish despite internal disagreements and huge floating losses, he would undoubtedly bear full responsibility if anything went wrong.
Thus, his mental pressure grew even greater for a moment.
However, fortunately, his judgment was largely correct.
As market trading hours continued, the GBP exchange rate indeed rebounded after hitting a low of 1.4805.
At 2:00 AM Beijing time, the GBP exchange rate returned to 1.4870, rebounding by over 60 points from its bottom.
At 2:41 AM, the GBP exchange rate returned to 1.4940, with just over 60 points remaining to regain the 1.5000 level.
At 2:49 AM, the GBP exchange rate rose to the 1.4960 level.
However, faced with yet another strong rebound of the GBP exchange rate in just over an hour.
Godfrey stared intently at the market.
After a moment of hesitation, he still couldn't bring himself to carry out a concentrated, large-scale position reduction at this level, given that the fund was still facing floating losses of nearly 300 million US dollars.
And similarly, having missed the previous opportunity to reduce positions at a higher level.
'Mitsui & Co. Investment Company' and 'Tianhe Capital', two linked institutions also expecting the GBP exchange rate to return to the 1.5000 level, were similarly reluctant to undertake large-scale, concentrated liquidation of their long positions while holding substantial floating losses.
(End of chapter)