"That pool of capital from 'Huayi Capital' is truly formidable," remarked Zhang Yanjun, an investment manager at Hong Kong's MacroSource Capital, with a sigh of admiration. "They just harvested a massive wave of profits in the forex market not long ago, and now they're out slaughtering across the board in the stock market again. How can this pool of capital be so capable? Every single time they strike, their timing judgment is pinpoint accurate."
"Now that we analyze it closely, we can see that the mainland real estate market and the severely undervalued mainland property stocks genuinely harbor massive investment opportunities," responded Shi Jindong, a core trader at the firm. "With such an obvious opportunity, why didn't the various major capital forces in the market unearth it earlier and form a consensus-driven market rally?"
"It's not that no one unearthed it; it's that no consensus expectation was formed," Zhang Yanjun said. "In the financial markets, being either a step too early or a step too late simply won't work!"
He vaguely remembered that a month or two ago, or perhaps a quarter ago,
a tiny minority of investors in the market, along with a few individual institutions, had also put forward similar viewpoints regarding the massive investment opportunities in the mainland real estate market.
However, back then, due to insufficient market confidence, coupled with the fact that housing prices across various mainland cities had not yet fully formed a primary upward trend, that viewpoint failed to attract the attention of more investors, institutions, and hot-money groups.
As a result, the market trends of the real estate sector across both the A-share and H-share markets not only failed to outperform the broader index, but instead fell rather than rose, lagging significantly behind the broader market.
"Indeed," Shi Jindong nodded slightly. "Expectations and consensus determine the height of a market rally and its timing of eruption. Having expectations doesn't necessarily mean prices will rise, but once intense expectations lead market capital to forge a unified consensus, the rally is bound to become as unstoppable as a breached floodgate. However..."
Shi Jindong paused for a moment before continuing,
"For Huayi Capital's pool of capital to buy so precisely at the eruption node of the 'real estate' rally, a portion of it must be down to luck, right?"
"Earlier, when this pool of capital engaged in massive short selling on the British pound exchange rate, many people also attributed it to luck," Zhang Yanjun said. "In the financial markets, a single accidental massive profit can be called luck, but being able to score massive profits every single time and capture the opportunity consistently ceases to be a matter of luck.
The saying goes that money earned purely by luck in the financial markets will eventually be lost back through sheer lack of skill.
If the investment strategy formulated by Huayi Capital and this legendary President Su had any significant element of luck involved, I imagine... this institution's capital volume would never have grown to its current scale.
Furthermore... among the private equity institutions in the industry managing tens of billions of yuan, how many lack their own hard power and unique core competencies?"
"The crucial point is that it's just too outrageous," Shi Jindong said. "This guy's judgment of investment opportunities in the financial markets seems never to miss. If this keeps up... he'll probably end up making away with all the money in the entire market."
Zhang Yanjun replied,
"It won't come to that. Once an institution manages an even larger volume of capital, operating it ceases to be so easy. In reality, as capital volume grows ever larger, the ultimate rate of return—no matter how one trades—will infinitely converge toward the trajectory of the broader market index.
After all, market liquidity is always finite. I imagine this is also an important reason why this institution has never opened new investment funds or established new fund products."
"To be simultaneously proficient in forex and stock market trading, and to excel so brilliantly in both investment domains..." Shi Jindong said, "whether on the mainland or here in Hong Kong, among Chinese-funded institutions, he must be the only one like this, right? Truly formidable.
No wonder so many big figures in the business world chase after him, and no wonder the over-the-counter share-transfer premium rate for the 'Huayi Expedition No. 1' fund product is so exorbitant."
"Indeed!" Zhang Yanjun exclaimed with an emotional sigh, his eyes filled with undisguised envy.
"Aside from the 'Huayi Expedition No. 1' fund product," Shi Jindong paused, then continued, "lately it seems the 'Huayi Chengyuan No. 1' fund product under this institution hasn't made any noise. Could it be... that President Su and this institution's primary investment objective moving forward is to focus exclusively on the stock market while temporarily abandoning the forex market?"
"That possibility certainly exists," Zhang Yanjun said. "The forex market differs from the stock market. Aside from being driven by special events, the exchange rate trends of various countries generally fluctuate within a narrow, oscillating range. Such narrow, oscillating range-bound movements possess neither investment value nor speculative value.
Therefore, when no major, extraordinary events erupt in the forex market, I think it is entirely reasonable and correct for Huayi Capital to temporarily shift its investment focus to the stock market.
Events like the recent 'UK EU membership referendum' in the forex market might not be encountered even once every three to five years.
If one were to constantly focus on forex trading and stubbornly trade through the garbage time devoid of event-driven catalysts, then over the long run, the rate of return would inevitably regress to mediocrity.
After all, those of us who engage in financial trading... in a certain sense, are entirely engaged in probabilistic trading.
Since we trade probabilities, then according to mathematical theory, the more we trade and the more frequently we trade, the closer our win rate will inevitably drift toward 50%—toward mediocrity.
Therefore, I believe that President Su of Huayi Capital choosing to skip the usual garbage time and only intervening in the market at critical time nodes when major events erupt is actually a very clever approach.
In the financial markets... those skilled in sitting in cash and waiting are the true masters who truly understand the market, and undoubtedly... President Su of Huayi Capital is one of those masters."
"Following that logic of yours, Manager Zhang..." Shi Jindong thought for a moment before asking, "does this institution's current shift of primary attention toward the stock market indicate that the A-share and Hong Kong stock markets harbor substantial investment opportunities over the second half of the year, and that the predictable sustained market rally will be quite favorable?"
Zhang Yanjun replied,
"I think that's a fair interpretation."
"Then do we..." Shi Jindong paused, then asked, "need to adjust our positions in a timely manner and increase our investments in the A-share or Hong Kong stock markets?"
Zhang Yanjun said,
"I believe it is necessary to increase our holdings in both markets. Moreover, looking at the current A-share and Hong Kong stock markets, I feel that our Hong Kong stock market actually offers even higher investment cost-effectiveness, alongside a stronger market capital consensus."
Because the A-share market had just undergone a brutal bull-to-bear transition, the confidence of market investors that had been extinguished would definitely not be easily repaired.
Conversely, looking at the Hong Kong stock market, when the A-share market rode a majestic bull run, the Hong Kong market index did not rise by all that much, meaning it did not overdraw future expectations.
Furthermore, the various capital factions participating in the Hong Kong stock market differed to a certain extent from those in the A-share market.
Zhang Yanjun believed that, overall, the Hong Kong stock market remained a market dominated by foreign institutional players.
The correlation of its overall market trajectory was much closer to that of the US stock market, while exhibiting a distinct divergence from A-share trends.
Additionally, according to his research and judgment, the US stock market continued to carve out new historical highs after undergoing a platform consolidation lasting one to two years.
This demonstrated that the ten-year-long US bull run could continue extending further.
Moreover, with the arrival of a new economic cycle—one led by 'technology'—the future expectations for US stocks clearly remained robust.
Since the bull market in the US stock market was continuing, then judging by the correlated trajectories between the Hong Kong and US stock markets, the future expectations for the Hong Kong stock market logically should not be too terrible, and it stood a very high likelihood of shaking off the influence of the A-share market to carve out a sustained upward trend.
Coupled with the increasingly depleted liquidity in the A-share market and the feeble expectations of investors mired in the quagmire, he judged that over the coming period, as the market trend in Hong Kong gradually improved, important mainland northbound capital flows—such as Huayi Capital—would inevitably head south in massive waves.
Clearly, a large influx of capital heading south in a follow-the-trend fashion would also propel the market trends in Hong Kong to climb even higher.
Therefore, under the influence of numerous factors, Zhang Yanjun had already formulated his resolution regarding subsequent investment plans.
He was prepared to increase his holdings heavily in undervalued, high-quality blue-chip stocks in the Hong Kong market, core stocks in the real estate sector currently sitting within the hot speculative spotlight, and the high-quality internet stocks he continuously favored.
Over the past year or two, the concentrated speculation by various capital forces surrounding 'mobile internet' had already drawn its curtain closed.
Yet Zhang Yanjun still firmly favored the future opportunities in the 'mobile internet' space, maintaining his conviction that domestic listed internet companies could further turn around their operational conditions in the future and achieve a dual explosion in performance and revenue scale.
"I think so too," Shi Jindong chuckled and said, "Compared to the A-share market, our Hong Kong market stocks clearly possess greater valuation advantages and cost-effectiveness, and the overall market is also more mature.
Furthermore, I believe this massive southward migration of Huayi Capital's capital and their violent position increases speculating on mainland property stocks will inevitably stimulate even more mainland institutional and major capital to head south.
Once this massive wave of capital heads south, they certainly won't limit their follow-up investments to just the single main-theme sector of real estate.
As long as a massive influx of capital enters and boosts the liquidity of our Hong Kong market, then the corresponding valuation elevation of those stocks will naturally follow as a matter of course."
Like Zhang Yanjun, although he harbored various doubts and suspicions as to how Huayi Capital and the legendary President Su managed to accurately nail the market rhythm every single time and strike the exact pulse of main-theme market rallies, his confidence in the future market trend was immensely steadfast.
He likewise believed that at this moment—while market valuations remained cheap and relevant hot main themes had just caught the wind—they should heavily increase their positions and seize the scarce, low-priced chips at the bottom.
Just as Zhang Yanjun and Shi Jindong were discussing this, much like the scene playing out inside MacroSource Capital, other comparable capital investment firms and asset management fund companies in Hong Kong were likewise analyzing current market trends and executing corresponding investment strategy adjustments.
Moreover, almost as if by prior agreement, everyone's gaze began turning toward the real estate sector and the array of mainland property stock order books that had just been stoked into life by Huayi Capital.
Naturally, it wasn't just mainland-funded players.
The numerous foreign institutional players who had consistently commanded the pricing power and trajectory of the Hong Kong stock market had also locked their gazes onto the mainland property stocks in the Hong Kong market at this moment.
Among them, inside the fund trading department of BlackRock Investment Management in Hong Kong, fund manager Anastasia watched the mainland property stocks exhibiting consecutive days of anomalous movement in the Hong Kong market, alongside the current reality that her managed fund portfolio held zero position weight in them.
For a moment, she was utterly furious.
"Why so sluggish? Why—when housing prices across major cities in mainland China have already reversed their slump and risen month-on-month for several consecutive months—is our position in the 'real estate' sector still zero?"
Anastasia angrily hurled the recently acquired analysis data files detailing housing price trends across mainland China's primary core cities over the past half-year onto the floor, staring intently at Harrit, the head of the fund strategy analysis department.
"What on earth do you people research all day long? Are you incapable of grasping such an obvious investment opportunity? Is life in Hong Kong perhaps too comfortable, causing you to lose your judgment and sense of smell in the financial markets? If so... then I can grant you all an extended vacation, and you won't need to come into the office anymore."
"It's not that we lost our judgment and sense of smell regarding the market," Harrit explained. "It's just that previously, the market did not buy into the logic behind the real estate sector."
"Is that so?" Anastasia sneered. "Then why is it buying in now?"
"This is merely a short-term capital convergence speculative behavior," Harrit said. "I don't believe the 'real estate' sector can sustain a lasting market trend."
"Unfortunately, you don't call the shots in the market," Anastasia retorted. "Is making subjective assumptions about market trends something a strategy analyst ought to be doing? Harrit, I am beginning to question your work capability. If I ever hear such subjective, presumptive conclusions from your mouth again, I might consider finding someone else to fill this position."
Hearing those words, Harrit froze in place with an ugly expression on his face.
Having reprimanded him harshly, Anastasia couldn't be bothered to pay him any further heed.
She turned her gaze to the rest of the room and instructed:
"I want all institutional research reports and industry data on the 'China Real Estate' main theme from the past half-year on my desk by tomorrow morning at the latest. Also... the latest strategic moves of Huayi Capital, alongside any accessible position data we can sniff out, cannot be left out either."
Following the earlier battle over the British pound exchange rate, Anastasia, serving as the investment business manager for BlackRock's funds in China, though she had not yet engaged in direct head-to-head combat with that institution in the financial markets, upon hearing that the dominant main-force capital steering this 'real estate' rally was none other than Huayi Capital, did not hesitate for a second to afford the matter the serious attention it warranted.
Naturally, she wasn't the only one; many foreign institutions investing in Hong Kong also turned their gazes unanimously toward Huayi Capital while frantically probing for the institution's upcoming strategic maneuvers.
It seemed that inadvertently...
Su Yi's directive shifting allocations toward the 'real estate' main-theme direction
had successfully triggered the nerves of countless major capital forces across the market, unlocking the long-dormant bullish momentum of a market depressed for months.
(End of Chapter)