The Son of Finance of the Great Age

  Chapter 212 Crazy Escape

   Undoubtedly, the headlines of the world's major financial media the next day were the news of Mexico's sudden devaluation. Regarding the devaluation announced late at night, even those who have been following Mexico for a long time did not expect that the Mexican government, which still has more than 20 billion US dollars in foreign exchange reserves, would suddenly announce a depreciation, even though the fundamentals of the Mexican economy were not so good before.

  Reuters reported that the Mexican government announced the devaluation of the peso, while the Mexican stock market was suspended for a day to give investors time to react. It is believed that this is a policy formulated by the new government before it is completed. It is reported that before the handover of the old and new governments, the staff of the new government strongly suggested that the peso be devalued.

The Wall Street Journal stated that the Mexican government hastily announced the devaluation of the peso when the foreign exchange reserves were still more than 20 billion US dollars. In the case of being defeated by hedge funds. This time the Mexican government took the initiative to devalue, on the one hand, to deal with the impact of speculative funds, and on the other hand, to bring the peso back to normal levels, because the value of the peso is indeed overvalued.

  The New York Times promoted that the riots in Chiapas, Mexico may be the main reason for the devaluation announced by the Mexican government this time.

  Bloomberg, on the other hand, used a series of reports to declare that the time to short the Mexican peso has come. They quoted people who did not want to be identified as saying that Wall Street is borrowing Mexican pesos on a large scale and planning to sell them in the next 24 hours, but there are very few banks in the market that are willing to lend Mexican pesos. Hedge funds are already looking to short the peso in the IMM market.

  Bloomberg is a financial terminal widely used by financial institutions, and their connections with people in the industry are far closer than those of news agencies. Therefore, when their news was published, almost everyone believed that Wall Street's hedge fund giants were all targeting the Mexican peso.

  Although the reactions of various parties to the devaluation of the Mexican peso were different, they all played a very critical role, that is, they aggravated the market's panic about the continued devaluation of the Mexican peso. Although the Mexican authorities have announced a depreciation, this behavior did not improve the sentiment of the market, but aggravated the panic, which is probably never expected by policymakers.

   Capital began to flee!

  The stock market was the first to flee. Since investing in the Mexican stock market requires pesos, many American investors convert dollars into pesos and then invest in the Mexican stock market. But now the peso has suddenly depreciated by 15%, so that all their hard-earned gains in the stock market have been taken in, and those who have not earned 15% of excess returns have instead become losses. This situation can be put into any investment are difficult to accept.

Although the depreciation of the peso is good for Mexico's exports and boosted the Mexican stock market, foreign investors have ignored this boost. What they want most now is to exchange their funds into US dollars as soon as possible to escape. out of Mexico.

  So when Mexico's banking system opened on the 20th, hundreds of foreign investors asked to use their stock accounts as collateral to borrow the corresponding pesos and then convert them into U.S. dollars.

  In the bond market, this situation is more common. Although some bonds are denominated in U.S. dollars and interest payments are also made in U.S. dollars, the bond market still sells under the general panic. These sell-offs have nothing to do with the devaluation of the Mexican peso, because they are US dollar funds. The biggest reason is the chain reaction of the political instability in Mexico and the sudden devaluation of the peso.

  As soon as the foreign exchange market opened on the 20th, there were a large number of peso selling orders in the market, which surprised the Bank of Mexico, which is in charge of foreign exchange stability. In their expectation, although the depreciation of the peso will have a considerable impact on the foreign exchange market, this is at most only a temporary phenomenon. After the market sentiment stabilizes, the peso will stay within their expected range.

   This is just their expectation. In fact, on the 20th, US dollar funds fled from the Mexican market reached as high as 8 billion US dollars. On this day, the Bank of Mexico does not have to do anything else but continue to use its foreign exchange reserves to buy and then buy pesos in the market.

  …

"Jingle Bell-"

  A loud ringing woke up Zhong Shi from his sleep. He stretched out his head from the warm blanket and looked around sleepily, only then did he realize that this was a premium suite of the Hilton Hotel.

  Collected to his senses, Zhong Shi gave a wry smile, then looked at the phone beside the bed, and couldn't help but another wry smile. His spirit has been in a state of high tension for the past two days, and he didn't relax until all the pesos were exchanged yesterday. This relaxation made him feel extremely tired. When he returned to the hotel where he was staying yesterday, he threw himself on the bed, without even taking off his clothes, and slept until the sun was rising.

   If it wasn't for this phone call, Zhong Shi would have continued to sleep. But he didn't plan to sleep anymore. Not many people knew about this call, but once there was a call, it must be very important information.

   "Hello, I'm Zhong Shi." After pressing the hands-free button, Zhong Shi threw himself heavily on the loose and comfortable bed, and asked absent-mindedly, "Who is that?"

   "It's me, Zhong Yi!" An anxious voice came from the phone, Zhong Yi's voice working in Washington. Zhong Yi didn't care about the politeness, and asked after he had just revealed his identity: "Mexico announced the devaluation of the peso yesterday, do you know that? This is a great opportunity to short the peso."

In Zhong Yi's view, it is a very good time to lend pesos to sell short, or to short pesos in the currency futures market, so when he saw the relevant news, he contacted Zhong Shi immediately, and just called After Hong Kong, he found that Zhong Shi was not in Hong Kong, but in New York not far from him. After asking for the number, he quickly called.

   Sure enough, Zhong Shi thought to himself, but he still lazily said: "Short pesos, I have already done so!"

   "Where's the position?" Zhong Yi didn't delve into Zhong Shi's words, but was slightly surprised, and asked about the size of the short-selling funds.

  Zhong Shi's head was still a little groggy, and when he heard Zhong Yi's question, he blurted out without thinking: "Around 8 billion dollars."

"8 billion U.S. dollars?" Zhong Yi yelled suddenly. He was not very clear about Zhong Shi's net worth, but he also knew that Zhong Shi definitely did not have so much money. "Where did you get so much money? How did you get it?" Did you know that the Mexican peso would devalue?"

  Hearing Zhong Yi's exclamation, Zhong Shi's head was a little clear. He suddenly realized that he had slipped his mouth, and now he was in an unexplainable situation. However, his reaction was fairly quick, and as soon as he rolled his eyes, he thought of the rhetoric that should be dealt with: "I am doing OTC options, and it happens that a large company is doing forward hedging, so I took the corresponding peso short order." The total amount of the target is 8 billion US dollars, it is not that such a large amount of funds has been used.”

  Hearing that it was an option, Zhong Yi didn't continue to ask. He knows that the underlying amount and quantity of off-exchange options are much larger than on-exchange options. But as soon as he changed the subject, he continued to ask: "Now it has depreciated by 15%, which means that you have made a profit of 1.2 billion US dollars. What's next?"

   "What do you think?" Zhong Shi stopped talking now, and asked Zhong Yi instead.

"The situation is not good!" Zhong Yi sighed, and continued with some emotion, "The World Bank has begun to conduct detailed research on the Mexican economy to discuss the possibility of rescue under the current situation. Although the progress is not very fast now However, according to the information I have received, some of the premise of these rescue plans is that Mexico cannot hold the peso and let it float freely in the market.”

   "Are you so pessimistic?" Zhong Shi asked a little strangely.

Zhong Yi sighed again, and said, "It's impossible not to be pessimistic. The Mexican government has really underestimated the power of financial institutions, and at the same time overestimated its own ability to resist risks. Our internal judgment is that the Mexican government is very likely to be overwhelmed." In this crisis, hedge funds are really too powerful."

  He just said whatever he thought of, and he didn't realize the role Zhongshi played in this currency crisis, and he didn't know the specific situation. However, Zhong Shi on the other end has a wry smile on his face. It is obviously his own power, but economists like Zhong Yi think it is the power of hedge funds. However, there is nothing wrong with this, because Tianyu Fund itself is a hedge fund. fund.

"If possible, let's settle these profits as soon as possible." After sighing and feeling for a while, Zhong Yi talked about another thing: "Recently, someone from China came to me and wanted to let me What do you think of me helping to set up an investment bank, a domestic investment bank?"

"Who is it?" Zhong Shi didn't take Zhong Yi's words seriously, he was still thinking about Peso's question, and asked a few words casually, "Is it so easy to establish an investment bank? What do they mean? Do you want to contribute money or effort?"

"There should be all of them." Zhong Yi frowned and thought for a while, then continued with some uncertainty, "Now it's just a preliminary contact, let's see if I have any intentions in this regard, and they still have a lot of candidates, definitely not just me One. The person who came claimed to be the assistant to the president of Huaxia Commercial Bank, and it seems that they are still negotiating with two investment banks, Goodman and Stanley, which one has not been decided yet."

"Huaxia Commercial Bank? Goodman? Stanley?" Suddenly the name of a company jumped out of Zhong Shi's mind. Didn't the later Huaxia International Finance Co., Ltd. cooperate with Stanley to jointly establish Huaxia No. 1 in 1995? A true investment bank?

   Speaking of this investment bank, one has to talk about their position in the underwriting of Huaxia state-owned enterprises. If this investment bank dares to call itself number two, no other investment bank dares to call itself number one. Since its inception, Joaquin has learned from the famous Wall Street investment bank Stanley & Co., and has inherent advantages in overseas markets. When large domestic enterprises want to list overseas or in Hong Kong, Huajin is often their first and only choice.

  To give a simple example, the overseas listings of China Petroleum Corporation and China Mobile were all underwritten by this investment bank. During the underwriting process, Huajin earned a large amount of underwriting fees.

   "Promise them!" Zhong Shi, who had figured it out, said firmly.

   Thank you very much for the support of book friends Lin Qi, Yun Maniac, and book fan 114477!

  (end of this chapter)