The Son of Finance of the Great Age

  Chapter 206 Selling Pesos

Aside from the Orange County bankruptcy incident, Zhongshi refocused his energy on the matter of exchanging Mexican pesos. He said that the exchange was not accurate. The accurate statement was to use U.S. dollar capital as a guarantee to borrow relatively large amounts from U.S. and European banks with branches in Mexico. Amounts of Mexican Pesos.

  The reason why it is a loan rather than a full exchange is very particular, especially when professionals operate similar things, they will never let their funds enter the country of the currency they want to attack. First of all, what they want to attack is the currency of this country, and it is absolutely impossible to hold it by themselves, because once the attack process is launched, it cannot be controlled by an organization. Secondly, if you hold the borrowed foreign currency in your hand, even if the currency is still strong, you can use foreign currency to repay it, because at this time there is no possibility of foreign currency rising in the short term.

   "Andrew, you can start building short positions on the Brazilian stock index!" After thinking for a while, Zhong Shi called Andrew in South America and said lightly.

Andrew on the other end of the phone was obviously still in a half-asleep state, and he just responded subconsciously. After a long time, he yelled strangely, and asked in disbelief: "Zhong Sheng, I heard you right, right? Is it bearish, the Brazilian stock index?"

   "That's right!" Andrew asked strangely, and then he realized that the time in Brazil should still be in the early morning, and he couldn't help but feel a little guilty, but the guilt disappeared immediately with Andrew's rhetorical question. How can this Andrew be so unreliable? After secretly slandering in his heart, Zhong Shi asked with some displeasure: "Why, do you have any opinions on my investment?"

"..." Andrew was silent for a while, and finally said boldly: "The current economic situation in Brazil is very good. It is said that their government also intends to start reciprocal trade negotiations with the United States. And this year, driven by the world economy, Brazil The export of agricultural products in China has increased significantly, and the increase in the export of natural resources, especially iron ore, has also attracted attention. At this time, rashly short..."

   "You don't need to remind me about this!" Zhong Shi interrupted Andrew without further explanation, "We are short-term holdings, and we still have to risk the exchange rate. You just execute the order."

   Zhong Shi, who hung up the phone, was a little helpless. This idea of ​​knowing what will happen in the future but not being able to tell others drove him a little crazy. After sighing deeply, Zhong Shi casually grabbed a research report in front of his desk and read it casually.

  The reason for shorting the Brazilian stock market is that among the stock markets of South American countries, only Brazil has opened stock index futures, that is to say, only the Brazilian market can make money by shorting. In markets like Argentina and Mexico, there is no shadow of stock index futures at all. Even if the peso collapses in the future, causing a financial crisis that spreads to the entire South America, it will be difficult to obtain profits through the stock markets of certain countries.

  …

  Bank of Mexico is the central bank of Mexico. The Congress has granted them the ability to operate independently. It is a relatively independent central bank.

  Like most of the central banks in the world, the Bank of Mexico is responsible for the issuance and circulation of currency, the lender of last resort, and cooperation with foreign legal entities. Naturally, monitoring foreign exchange circulation and market interest rates is also part of its function.

"Mr. Sanchez, the rediscount of the three-month period has recently increased significantly. Do you want to report this matter to the higher authorities? Do you need to increase the rediscount rate?" A young staff member asked the bank council consultant Manu asked Sanchez.

  Manuel Sanchez is a tall, silver-haired, middle-aged man with a standard South American face. He is an advisor to the Mexican Banking Council, responsible for interbank discounting and rediscounting.

  Since inter-bank deposit and loan positions need to be liquidated every day, rediscount reflects the real situation of bank deposit and loan business to a certain extent. Normally, these positions can be made up by the inter-bank lending market, but after dozens of commercial banks lend a large amount of loans together, the amount of funds in the inter-bank lending market is also somewhat stretched. In this case, the commercial banks can only Find the mother, the central bank, the Bank of Mexico, and ask them to open the floodgates.

   "The savings rate continues to decline, but the loan rate has increased? Increase the rediscount rate? Are you crazy?" Manuel Sanchez rubbed his temples vigorously, and his head began to ache again.

  Because of the financial opening since the early 1990s, in order to attract foreign capital, the Bank of Mexico set a higher bank interest rate, which certainly attracted a large amount of foreign capital, but at the same time caused inflation to a certain extent. Although these funds entered Mexico, the investment and productivity in Mexico did not increase much. The economic data of Mexico in the first three quarters of 1994 was simply appalling, and the current insider forecast was only about 2%.

  In this case, the savings rate has become inevitable. While the Bank of Mexico has done a good job of stabilizing the exchange rate, this policy of currency stabilization has come at the expense of adequate market responsiveness. At this time, the major commercial banks suddenly began to lend a large amount of money. Although it was only for three months, this abnormal situation still attracted the attention of the staff of the central bank.

  As an advisor to the central bank's board of directors, Sanchez's main job is to monitor the abnormal dynamics of the responsible department, and form a report as soon as possible, and send it to the president's desk. But he did not intend to do so. For one thing, a group of high-level government officials, including the governor of the Central Bank and the Minister of Finance, are playing games. The corresponding content is whether to devalue the peso before December 1, 1994, because that day was a new The elected President Zedillo will form a new government.

Although the new government has come to power, it has only been in power for a few days, and the exchange rate policy has not changed much. Therefore, at this time, Mexico is still implementing a fixed exchange rate system pegged to the US dollar.

Under such circumstances, sending the abnormal fluctuations in the rediscount market to the office of President Otis is tantamount to adding trouble to the busy schedule. Although Sanchez understands that this will not be a trivial matter, but he can sit on the board of directors. Advisory position, Obviously understand which is more important.

   "Let's just let it go!" Sanchez finally rejected the young analyst's proposal.

  …

It has to be said that Mexico is a country with a unique vision for the current economic situation. The staff of the new President Zedillo suggested twice in September and November that the current government should lower the peso interest rate to prevent the current account in international trade. The further expansion of the deficit, but in order to maintain the North American trade zone, Salinas' cabinet, especially the finance minister and the central bank governor, flatly rejected this proposal, which brought Mexico's fixed exchange rate system to an extremely dangerous situation.

   "Mr. Zhong, the loan has been completed! What is our next goal? Put these funds into Mexico?" Two days later, in Zhongshi's office, Maxim was reporting the situation of the Mexican peso loan.

In his view, it is very unwise to exchange Mexican pesos at this time, because Mexico's domestic economic data is not impressive. Although the interest rate is relatively high, Mexico is a very unstable country. People were also assassinated. The turbulent political situation means that the risks in the capital market are infinitely magnified, although it also means opportunities, but Maxim does not think this kind of opportunity is a good thing.

"Starting today, convert these Mexican pesos into U.S. dollars, at least 500 million U.S. dollars per day, and there is no upper limit." Zhong Shi secretly breathed a sigh of relief, knowing that the loan situation has been completed, and the rest is the matter of the exchange .

  8.5 billion U.S. dollars, more than 25 billion pesos, such a large loan, Zhongshi used 15 commercial banks, and it took a week to lend it all. In this process, although there is nothing wrong with the loan behavior, such a large-scale loan will inevitably have an impact on the market in the short term. If the regulatory authorities find something wrong and take timely measures, Zhong Shi's well-designed behavior All previous efforts will be wasted.

For example, if the Mexican government announces the devaluation of the peso at this time, Zhongshi can only put these pesos on the market as soon as possible and convert them into dollars, and then grasp the corresponding progress during the devaluation of the peso , because once the historical process changes, it is impossible to predict where the peso will fall. If the corresponding interest cannot be earned, these funds of Zhongshi will face the danger of loss.

  Although attacking the fixed exchange rate system is considered to be the investment method with the least risk and the highest return rate, even this investment model has considerable risks, especially for the party with a large position and a long holding period. Because the larger the position, the more interest will be paid. If the attack fails in the end, the loss in the process of exchange and interest will be quite huge.

  Of course, this loss is far out of proportion to the gain, which is why financial institutions such as hedge funds, investment banks, and commercial banks are keen to attack countries with fixed exchange rates.

  Although Mexico currently has two different views on the exchange rate system, due to the high interest rate policy, its domestic foreign capital inflow is still in a positive direction, that is, there is still a surplus between the inflow and outflow of US dollar capital. In addition, the Bank of Mexico has foreign exchange reserves of tens of billions of dollars, so the Mexican government is not worried about the attack of international hot money.

Regarding Zhongshi's decision, Maxim has been vaguely aware of it. Although he has experienced the battle against the Japanese stock market, he never thought that a fund's capital scale could overwhelm a country's foreign exchange system, especially Tianyu Fund. This only has a capital scale of more than 2 billion. So after agreeing, he went out.

   Zhong Shi’s last move is of course more than that. He wants to recruit a large commercial bank to operate together. Otherwise, with the strength of his family, he will not be able to compete with Mexico’s huge foreign exchange system. Thinking of this, he called Jeremy: "Hi, Jeremy, I'm Zhong Shi from Tianyu Fund. I need your help..."

   Thank you for making me think about it again! At the same time, I would like to thank the book friends who have paid attention to this book recently. The achievements of this book come from the joint efforts of everyone, and the author will continue to work hard. Thank you~

  (end of this chapter)