The Son of Finance of the Great Age

  Chapter 309 Fifth Issue: Shocking News (2)

  In the foreign exchange market, since October 24, the exchange rate of Hong Kong dollars against the U.S. dollar has risen crazily, and the quotation was even reported to the point where 1 U.S. dollar was exchanged for 7.7199 Hong Kong dollars. This number has far exceeded the psychological expectations of the market, so many banks took the opportunity to sell Hong Kong dollars, which also caused the exchange rate of Hong Kong dollars to fall. As of the close of trading in London, the quotation of Hong Kong dollars against U.S. dollars was 7.73 Hong Kong dollars per U.S. dollar.

   This price undoubtedly made the HKMA very satisfied, because this price has hit a new high since 1997, at least to ensure that in the next stage, the Hong Kong dollar will not have to worry about attacks from international speculators.

On October 27, international speculators continued to return to their positions. Although the exchange rate of the Hong Kong dollar fluctuated greatly on this day, due to the increase in market participants and arbitrageurs, the exchange rate of the Hong Kong dollar also fell slightly. The final price was reported at 7.7325 .

   It seems that the HKMA’s move to raise interest rates has been fully effective. Not only did international speculators not attack the Hong Kong dollar, but they were also burdened with a relatively heavy interest burden. Subsequently, the HKMA began to sell Hong Kong dollars in the market slightly and buy U.S. dollars, trying to keep the Hong Kong dollar at a high level for more time.

  …

   On October 27th, US time, the Dow Jones Index opened. As the most important market in the world and one of the latest markets to open, the performance of the Dow Jones Industrial Index is undoubtedly the bellwether of the global market the next day. If there is any trouble in the Dow Jones, other markets will be affected to varying degrees, just like the "Black Monday" in 1987. First, the Dow Jones Industrial Index fell, and then the Hang Seng Index fell in Asia. Although it first spread to the European market, But the results, in turn, affected the US market.

Prior to this, the Dow Jones Industrial Index and the Hang Seng Index fell for three consecutive days, but overall they behaved fairly normally, and the fluctuation range was within expectations. Although the currency turmoil in Asia has re-rolled, this has nothing to do with the U.S. market Not too big.

   It's just different from usual that this time the storm against the Asian market hit the US market very quickly with unparalleled speed, and the reason was just a news that hit the performance of the Dow Jones industrial index hard.

  The daytime in the United States belongs to the trading time, and correspondingly it belongs to the evening time in Asia. For some reason, a rumor suddenly began to spread in the market. It is said that the Swiss Central Bank will sell 1,400 tons of gold reserves. Although this news cannot be verified (it is past working hours in Europe), and it is not known where it first came from (anonymous sources, unnamed officials, etc. source), but the news was enough to cause a major shock to the market.

  The whole market is crazy!

Since the collapse of the Bretton Woods system, the U.S. dollar is no longer linked to gold, but the U.S. dollar, as the most powerful currency in the world, is still considered to be the most valuable currency besides gold. To some extent, it can be seen as part of gold.

  As a value metal recognized around the world, its price trend is not only affected by internal factors such as production, reserves, and spot supply market, but also by the price of the US dollar in the long run.

   Simply put, the dollar and gold have a negative correlation in the long-term price relationship, but a positive correlation in the short-term. Although this relationship is strange and incomprehensible on the surface, it is not logically contradictory, because in the long run, the price of gold remains relatively stable, because its long-term value mainly depends on factors such as production and reserves. It has little to do with the performance of other economies.

For example, if the U.S. economy does not improve in the foreseeable three to five years, then the funds put into the U.S. market or invested in the U.S. dollar will not yield much. In this case, the long-term value of the investment is quite stable. Markets such as gold and silver appear to be more secure, which is why in the long run the price of the dollar and gold go against each other.

  In the short term, the positive correlation between the U.S. dollar and gold is purely based on market considerations. Some may be due to inflation, while others may be due to the U.S. dollar. In short, it cannot be generalized.

  The news about the Swiss central bank selling gold this time is obviously of short-term effect. Naturally, this selling behavior is not caused by the rise of the dollar, but the market’s panic over the entire asset price. Since the decline in gold prices is very likely to become a reality, compared to gold, the prices of many assets in the market currently appear to be inflated, so the market naturally forms expectations that prices will fall. Under the support of this logic, the Dow Jones Industrial Index soon took a sharp turn and began to fall sharply.

In the gold market, the gold bears who had received inside information as early as last Friday had already directed the dramatic plunge. On October 24, Eastern Time, the New York Gold Index plummeted $16 an ounce to close at At $309 an ounce, it fell as much as 5.03%.

However, the stock market realized later that the Dow Jones Industrial Index fell sharply on October 27 due to the sell-off of gold. Following the trend, no matter which one it is, the essence of both is the loss of confidence.

  The Dow Jones Industrial Average began to fall from 7715 points at the opening, and the trading was sluggish all day. The market was full of selling stocks, but very few buying. By 2:35 EST, the Dow Jones Industrial Average fell 350 points, triggering a market circuit breaker mechanism that halted trading for 30 minutes.

  The circuit breaker mechanism was born out of the stock market crash in 1987. The general rule is that when the market points drop to a certain level, trading will be stopped for a certain period of time. The rule at this time is that the Dow Jones Average falls 350 points and stops trading for 30 minutes, and the Dow Jones Average falls 550 points and stops trading for one hour. The reason why such regulations are set is to give investors time to calm down. After all, if the market continues to fall crazily, even the most rational investors will feel terrified and panic. Emotional, it is inevitable to make irrational investment decisions.

  This is the first time the Dow Jones Industrial Index has triggered a circuit breaker since the circuit breaker was set in 1988. It's just a pity that when the market resumed 30 minutes later, investors' confidence did not recover. When trading resumed at 3:05, the market continued to fall, and this time the rate of decline was much faster than before. Even the market makers joined in, because they also worried that the spot stocks on hand could not be cleared. As a result, before the closing time, the Dow Jones Industrial Index once again triggered the circuit breaker mechanism, and fell 550 points at 3:30. According to the rules Trading will be stopped for one hour, and the remaining trading time is less than an hour, so the trading of the Dow Jones market for this day ends here, and the market closes early.

  The Dow Jones Industrial Index fell from 7715 points to 7161 points throughout the day, falling 554 points, a drop of 7.18%.

Not to mention the authenticity of this news, the turmoil that occurred in the US market soon spread to the Asian markets that opened later, while the Hang Seng market in Hong Kong has not recovered from the sharp drop in the past few days, and then suffered a setback.

   The Australian market was the first to be affected. With the price of gold plummeting, both the Australian dollar and the Australian stock market fell. The Australian stock index fell 84 points, from 2561 points to 2477 points, a drop of 3.3%. As Australia is the world's third largest gold producer and gold is also Australia's main export, the news that the Swiss Central Bank is preparing to sell half of its gold reserves has caused a severe setback to the Australian stock market.

The precarious Hong Kong market is even more unbearable. It opened at 9649 points, a full 850 points drop from the closing price of the previous trading day. With the opening figures fell to freezing point.

  …

"Lie 100 lots, let's see how the market reacts." On this day, Zhong Shi did not sleep as soundly as he did a few days ago, because he knew that today is a very critical day. There were three days left, and because of the sharp drop in the US market the day before, he smelled something unusual, so no matter how tired he was, he had to hold on even if he gritted his teeth.

At this time, he was calling the broker. Although it is easy to place an order through the computer now, Zhong Shi still chooses this traditional method, because his trading lot is too large, which makes the traders of the entire brokerage firm surround him. His transaction to work. In this way, it is equivalent to hiring a team outside, and it will not affect the work of Tianyu Fund employees. After all, this is his private transaction.

100 short orders priced at 9600 were immediately thrown to the market, and all were sold within a few minutes. Among these transactions, most of them were short exchanges, which also meant that the market was very bearish about the market outlook, and even Still beyond Zhongshi's expectations.

   Seeing the speed and magnitude of the transaction, Zhong Shi couldn't help but frowned, stroked his chin and thought for a while, then decided to temporarily suspend trading, preparing to take a look at the attitude of the bulls first.

  Because there is not a lot of trading time left for the bulls on the October contract, only about three days. In this case, even if the long positions change months, there will still be a number of hands corresponding to the unclosed short positions in the market in October. The problem now is that the bulls definitely hope to change the month and achieve the purpose of reducing losses through the rollover, while the short side has unclear intentions and needs to express it through disk words on the disk.

Zhong Shi's previous transaction was to observe the other party's reaction through probing. No matter if he is long or short, he will definitely have a strong interest in this large order with a lot size of 100 lots. After all, he can get rid of this Although the number of institutions is not limited, it is also sufficient to represent the intentions of a well-funded institution.

   Sure enough, at least judging from the current transaction situation, the short side is not too satisfied with the price of 9600, and quickly wiped out these short orders. Although Zhong Shi is not sure whether this force belongs to the party that is shorting the spot stocks of Hong Kong stocks, all he can do now is wait.

   Soon, Hong Kong stocks fell again, especially financial stocks and real estate stocks. By noon, the banking and real estate stocks fell by 6.58% and 6.74% respectively on the basis of today's opening price. And the stock price of Restoration Bank, the leader in the banking industry, even fell as much as 8% at one point.

  As for state-owned enterprise stocks and red chips, since the market opened, there has been a steady stream of capital inflows, and the performance is quite surprising. It once rebounded by about 4%. It's just a pity that they can't stand alone, and it didn't take long for them to encounter a heavy attack. By the end of the listing, the red chip and state-owned enterprise stocks fell by 4.47% and 3.13% respectively, and none of the Hang Seng Market's sectors rose.

   At the close of noon, the Hang Seng Index closed at 9240 points.

  (end of this chapter)