The Son of Finance of the Great Age

   Chapter 213 Free Floating

  As for Huajin's extremely delicious cake, Zhong Shi would naturally not let go of the opportunity to take a bite, but whether the matter will work out in the end depends on the attitude of Huaxia Commercial Bank.

  Although Zhong Shi doesn't know the situation of other candidates, Zhong Yi still has a big advantage. First of all, he has a professional background and works for the World Bank. Secondly, Zhongyi has a lot of financial support behind him. Although neither the Chinese side nor the US side will allow him to hold too many shares, neither the Chinese side nor the US side agree that the other party has an overwhelming shareholding, so Zhongyi's funds are It will become a bargaining chip to balance the discourse power of both parties.

  Under such circumstances, Zhong Yi, who was born in the Mainland, has roots in Hong Kong, and is no stranger to the capital market, stood out among several candidates and became the candidate that both the Chinese side and the US side focused on.

After hanging up the phone, Zhong Shi thought about it again, and after confirming that Zhong Yi had a greater advantage, he lay back on the bed again. At this time, he had completed all the operations in the capital market, and all that was left was to wait for the collapse of the Mexican exchange rate system .

  …

  The trading in the foreign exchange market ended on the 21st. Otis returned to his office, threw himself heavily on the sofa chair, and let out a long breath.

  At this moment, he was exhausted, and his body kept reminding him to take a break, but his sober mind kept telling him that it was not time to take a break, because the situation facing the Mexican foreign exchange market was extremely dangerous and had reached the edge of a cliff.

   During the two days of the 20th and 21st, the capital fleeing from the Mexican foreign exchange market was as high as 15 billion US dollars, which is still a figure revealed from the foreign exchange market. In fact, not only foreign investors, but even the Mexican local banking industry began to exchange a large number of US dollars from the Bank of Mexico. Although the Bank of Mexico has strict supervision on this, it cannot stop this speculative behavior at all.

At the end of the day, the remaining foreign exchange reserves of the Bank of Mexico were only 500 million U.S. dollars, which was not enough for a month's imports. Now there is only one way for the whole of Mexico, and that is to free the peso float.

  In two days, nearly 20 billion U.S. dollars escaped from the foreign exchange market. This is a figure that can shock the entire financial market, and it is also a fact that Mexico's policymakers did not expect. Otis, Antonio and others were urgently summoned by the president to discuss relevant countermeasures, but at this time they have no countermeasures to come up with.

   As a result, Otis and others were scolded by the president, and after the president calmed down, he had to face the fact that the amount of foreign exchange was less than what was needed for one month's imports. After brief consultations, senior government officials agreed with Otis to announce the peso's peg to the dollar this evening, allowing it to float freely in the market.

  This will be an extremely serious consequence, and it is very likely that Mexico will evolve from the current currency crisis into a financial crisis sweeping the entire industry, and even other countries in South America will be involved. But the Mexican government has no choice, and they don't have the ability.

Otis only felt a burst of relaxation. To him, the past few days seemed to be as long as several years. Although he was not the culprit of the current situation, public opinion and the public will eventually judge this situation and He is to blame for the consequences.

   "Mr. President, are we holding a press conference now?" Okova walked in quietly and asked softly.

  At this time, everyone is cautious, and no one dares to offend Otis who is in a state of irritability. Even Okowa, who has always been careless, has a cautious and cautious attitude.

  Otis frowned even deeper, and he didn't speak for a long time. Just when Okowa thought he had fallen asleep, he heard Otis sigh, as if asking Okowa and asking himself: "Am I the most incompetent central banker in this country? "

Okova said quickly: "No! Of course not! How could you be the most incompetent central bank governor in this country? These things are not your fault, but the concentrated outbreak of problems accumulated over a long period of time. Anyone who Nothing can be done."

  Otis treats him well as an assistant to the president, so Okova would naturally say so. Of course, what he said was not just because of the good personal relationship between the two, but the actual situation. He believes that even if Greenspan takes the current position of Otis, there is probably only one way to go.

This is the tragedy of the fixed exchange rate system. Once the capital account is fully opened and the currency is freely convertible, the central bank of the country will always have to worry about similar problems, especially for a country like Mexico, which faces such a powerful neighbor and wants to borrow Their funds are used to develop the economy, and they have to face sudden currency wars all the time.

  But this situation does not happen often, and there must be corresponding prerequisites. First of all, the currency value of this country must be recognized as overvalued; second, there is a problem with the economic development of this country. Instead of flowing into the real economy, funds flow into the virtual economy, especially the capital market, which is often the stock of this country. market.

  As a result, an extremely strange phenomenon has arisen. The stock market in this country is booming and hitting new highs repeatedly, attracting almost everyone to invest money in the stock market. At least from the perspective of the stock market, the country's economy is developing very well, but in fact it is full of crises. In this case, it only takes one opportunity to destroy the country's foreign exchange system, and then destroy the country's entire economy.

   Now, this situation falls to Mexico.

According to incomplete statistics, funds from the U.S. fund industry alone have invested as much as $70 billion in the Mexican stock market. Therefore, although the Mexican stock market has responded positively to the depreciation of the peso in the past day, this increase It is impossible to retain foreign investors at all. As long as 20% of the huge US$70 billion capital outflow is enough to overwhelm Mexico's fragile foreign exchange system.

Otis can imagine that once the free float of the peso is announced, the stock market will face a greater impact. At that time, not only some foreign investors' funds will flow out, but foreign investors in the entire capital market will withdraw their own funds. Funding up.

The stock market plummeted, interest rates skyrocketed, it was difficult to borrow money, the banking system collapsed, and then brought inflation, and the unemployment rate increased... A series of tragic pictures flashed in front of Otis, although these have not happened yet, but Otis knows, This could happen before long, and there was nothing he could do about it. This powerlessness made him very irritable and helpless.

   "Sir, sir..." Seeing that Otis was lost in thought again, Okova hurriedly urged twice, and now there is not much time left for the scheduled press conference.

   "It's nine o'clock in the evening!" Otis said bitterly after recovering from the association. Then he lit a cigar from the table, hiding his entire face behind the curling smoke.

   On the evening of the 21st, the Bank of Mexico announced that, because it was unable to maintain the exchange rate level after the devaluation of the peso, it announced that starting from 0:00, the peso would break away from the exchange rate system pegged to the US dollar and officially float freely.

The foreign exchange market responded immediately, and the peso immediately began to depreciate, which was surprising. On the 22nd, the peso fell from the previous 3.977 pesos to 1 dollar to 5 pesos to 1 dollar, a full drop of more than 25%. magnitude.

The next day, the peso continued to fall in the foreign exchange market. Although there were voices that the peso had reached a normal valuation level, the flight of funds could not be contained in a short while. On this day, the peso fell to 5.2 pesos to 1 US dollar. down 4%.

  Then the peso rose slightly, reaching the level of 5.05 pesos to the US dollar on the 25th, but the good times did not last long. In January, the peso continued to fall and reached 5.23 pesos to the US dollar on January 15. At this time, the entire South American region has suffered from the consequences of the free floating of the Mexican peso. The stock market indexes of countries such as Brazil, Argentina, Chile, and Peru have fallen sharply. The stock index of Argentina fell by more than 6%, Chile fell by 4%, and Brazil fell by 7%. %. The Mexican stock market is even worse. Compared with the peso before the depreciation, it has fallen by more than 20%. The consequence of this decline is that foreign capital continues to panic and sells in the stock market, which in turn causes the stock market to continue to fall.

On January 15, 1995, Zhongshi began to buy pesos in the market. It was not that he thought that the exchange rate of pesos had fallen to the end, but that the United States, the International Monetary Fund, the Bank for International Settlements and other Latin American countries jointly announced that To aid Mexico in repaying its foreign debts and supporting the peso, several countries and institutions have combined a total of 50 billion US dollars to invest in the Mexican market. Although it can't stop the decline of the market for a while, it has cast a glimmer of light on Mexico in the dark.

Compared with the previous exchange rate of 3.91 pesos to 1 U.S. dollar, Zhong Shi now only needs to spend 6.365 billion U.S. dollars to buy back the corresponding pesos. After repaying the borrowed 5 billion U.S. dollars, Zhong Shi’s account has added 1.365 billion Dollar. Due to the sharp increase in the interest rate of the Mexican domestic bank, Zhongshi paid an additional US$15 million in interest, and the final profit reached as much as US$1.3 billion.

  In the IMM market, Zhong Shi invested 100 million US dollars through leverage and made a full profit of more than 300 million US dollars, with a rate of return of 300%. This is still under the condition of limiting positions.

  Brazilian stock market, the current floating profit is 104%, that is, 100 million U.S. dollars becomes 200 million U.S. dollars. In the off-exchange option market, Zhongshi once again made a profit of 500 million US dollars. This was because the opponent negotiated with Zhongshi in advance, and they could not allow the contract to continue to suffer unlimited losses.

  By February 1995, Zhongshi's short-selling operations on the Mexican peso were all over. In this crisis, he earned a total of 2.2 billion US dollars. Among them, Tianyu Fund earned 600 million US dollars. On the first anniversary of Tianyu Fund's establishment, it successfully doubled its net value by 1.5 times, becoming the most dazzling star fund in the capital market.

   Thanks to book friend Amy for voting for the monthly ticket! Thanks to the familiar eyes of book friends for rewarding and promoting this book! I also thank the book fan 114477 for the monthly ticket and the reward. As for the renewal ticket, I am sorry that I can only return it in full, but I am still very grateful for the encouragement to the author.

  (end of this chapter)