What's wrong with me being a rich man?

Chapter 473 The Magic Box
A new player has emerged in the emissions scandal.

Following Renault and Volkswagen, the equally renowned Bosch Group has also entered the fray.

The world is changing too fast, and many media reports that have just been published must be updated with new content. On the one hand, there is the "dog fight" between Volkswagen and Bosch, and on the other hand, there is the search for more clues in the automotive industry.

Many media professionals have expressed similar sentiments on social media – the news for the year's events has already been pre-booked.

Car emissions scandal!
Some people joked, "If I had to think of a news story that could steal the spotlight from the emissions scandal, I would vote for the one that revealed the true face of the mountain."

The escalating emissions issues in the automotive industry have not made people overlook the most mysterious short seller.

The more problems there are, the bigger the issues become, and the more dazzling the mountain peaks appear.

According to a reporter from the Hong Kong Economic Journal, given that "Over Peak Research Company" is registered in Hong Kong, the Hong Kong Securities and Futures Commission has received a request for assistance from Europe to investigate the true identity of Over Peak.

However, the registration issue for Over Peak has already been investigated extensively and no further information can be provided.

One difficulty now is that the information released by Guoshanfeng is not directly related to its capital operations. The short-selling funds targeting the public could be A, B, or C, making it almost impossible to prove that A, B, C, and Guoshanfeng are substantially manipulating the market.

The entity "Over the Peak Research Company" is completely clean and has absolutely no financial transactions.

Furthermore, as the world's largest automaker by market capitalization, Volkswagen Group, despite its stable performance, still faces some "traditional" short selling. Unlike the United States, Germany does not disclose its short selling positions. Some media outlets, based on its 20% implied volatility and industry norms, estimate that the scale of short selling before the "emissions incident" was at least around 28 billion euros.

Such a short-selling ratio is not high for a traditional manufacturing company like Volkswagen, and its performance among European auto stocks is also very stable. However, its market capitalization is very high, and it is obviously impossible for such a large amount of funds to pass through all the peaks. Therefore, the effect of targeted screening will be reduced.

Even assuming that short seller A's procedures were legal and its funds were legitimate, how can it be proven that it and another party B, whose procedures were also legitimate, were jointly manipulating the market?
Without cross-market coordinated suppression or deceptive trading to create false liquidity, the decline in Volkswagen's stock price ultimately stemmed from serious negative issues within the company itself.

This is extremely rare for a publicly listed company of Volkswagen Group's caliber.

Privately, some German investigators were quite annoyed: "The masses are not only committing crimes, but also making mistakes!"

Committing a crime is wrong, and getting caught makes it even worse!
This targeted investigation has circled back to the point that Europe needs to examine offshore structures to consider the applicability of anti-money laundering rules, or attempt to identify substantive coordinated short selling through thorough investigation of the underlying assets.

In addition to focusing on the progress of the emissions scandal, The Wall Street Journal is also paying attention to Europe's investigation into the identity and funds of Mountain Rider, and is quite interested in analyzing the risks faced by Mountain Rider and the dilemmas faced by European regulators in conjunction with European laws.

The EU's Securities Settlement Regulation (SSR) will not officially come into effect until July 1st. Germany's Securities Trading Act (WpHG) does not incorporate the EU's information disclosure rules into its implementation. Transactions involving derivatives such as Total Return Swaps (TRS) are neither required to be reported nor easy to track.

Different rules among member states, non-penetration by offshore countries, and the use of various derivatives to circumvent these restrictions all objectively facilitate the deliberate concealment of short-selling funds, increasing the difficulty of investigation and management by regulatory agencies.

"Even though the short selling of the public by the mountain peak is not yet complete, it is destined to become a textbook case. We interviewed Professor Sack of the Department of Finance at Harvard Business School. He believes that the mountain peak, a contemporary short seller, is turning the regulatory rules of different jurisdictions into a strategic advantage. Its complex game with market regulation will inevitably become the new normal in the global financial market."

Of course, as a media outlet with a stance, The Wall Street Journal also called for the promotion of global financial information sharing at the end of its special report. The fact that two European automakers and a Tier 1 supplier have been caught in the emissions scandal has not only attracted strong media attention but also caused a strong bias in the flow of funds in global financial markets.

Before Martin exposed Bosch, a lot of funds were betting on short positions in European listed automakers such as BMW, Daimler, and Citroën. After he did, more funds began to be diverted to the stocks of listed suppliers.

Bosch Group isn't listed, so that's one thing, but Continental AG, which is listed on the Frankfurt Stock Exchange, is the first to be affected!
It is a Tier 1 supplier comparable to Bosch Group globally, a representative of German industry, and can also provide diesel emissions cheating technology. It also has a market value of up to 300 billion euros. Regardless of whether it has actually done it or not, it is just going to charge ahead.

Secondly, companies like Faurecia, listed on the Paris Stock Exchange, are leading global suppliers of exhaust systems, providing three-way catalytic converters and particulate filters for 60% of diesel passenger cars in Europe. With such a relevant business and a market capitalization of 6 billion euros, they are also worth considering.

Furthermore, listed companies related to the diesel vehicle concept, such as MAN, which manufactures diesel engines for commercial vehicles, and Valeo, which specializes in thermal management for diesel vehicles, have become targets for short-selling funds.

We'll eat meat over the mountain peak and everyone will drink soup; we can't just miss this great opportunity!

Europe undoubtedly dominates the global diesel vehicle market and supply chain, from the special steel used by Sandvik in Sweden to produce diesel injectors, to the SCR catalysts supplied by BASF in Germany, to the high-temperature resistant plastic components provided by DSM in the Netherlands…

These supply chain clusters based in Europe have built an unshakeable industrial moat with their precision manufacturing capabilities and technological patent barriers, making them a microcosm of the pinnacle of traditional gasoline vehicle technology.

However, the mountain peak opened Pandora's box of emissions fraud.

Once the Pandora's box was opened, the seemingly solid industrial moat instantly collapsed. Not only did American hedge funds rush in, but European domestic funds also immediately changed direction, transforming into fierce and greedy predators, heading straight for the most lucrative listed companies in the heart of the moat.

Renault is a pillar of the French Big Three automakers alliance, Volkswagen is a source of pride for German industry, and Bosch is a core supplier for almost all mainstream automakers. A series of scandals has caused the European automotive industry to suffer the most severe crisis of confidence in its history.

Since May, the French CAC40 index has fallen by 15.2%, the German DAX index by 13.8%, and the Euro Stoxx 600 Automotive & Parts Index by a cumulative decline of 29.6% since the end of April, marking the largest monthly drop since the index was established.

The collapse of European auto stocks is rapidly spreading to global financial markets. Although Ford and General Motors were not significantly affected, their stock prices also fell, dragging down the Dow Jones Industrial Average in the United States.

大众集团的信用违约互换CDS利差在5月18日后扩大215个基点，从58个基点飙升至273个基点，雷诺CDS利差扩大187个基点，博世扩大156个基点，欧洲投资级企业债指数利差整体扩大42个基点。

In the commodities market, urea prices plummeted by 8.7% in a single day due to market expectations that shrinking demand for diesel vehicles would lead to a decrease in demand for exhaust treatment agents.

Economic globalization leads to global crises, and China's financial market is no exception.

A leading local transportation company in Shanghai, listed on the A-share market, whose main businesses are taxis and logistics, plummeted to its daily limit the day after its sharp rise, becoming one of the most innocent victims in the global financial market.

Because its name is "Public Transportation".

(End of this chapter)