Sharpening the Blade Against the Red Wall: From Hong Kong to Handong

On August 6, 1998, the opening bell of the Hong Kong stock market shattered the brief calm following the defense of the Hong Kong dollar like a death knell. The Hang Seng Index opened at 13000 points, but within just half an hour, it plummeted 500 points. Heavyweight stocks like HSBC Holdings and Hong Kong Telecom were overwhelmed by massive sell orders, with their share prices falling by nearly 10% in a single day. On the screen in the liaison department's analysis room, red downward arrows were densely packed. Li Jianguo pointed to the real-time trading data, his voice filled with anxiety: "Director Zhou, the short sellers came prepared! Quantum Fund, in conjunction with several hedge funds, has been dumping blue-chip stocks through offshore accounts. HSBC Holdings alone has been hit with HK$2 billion in sell orders!"

Panic spread like wildfire through the market. At the Central Securities branch, retail investors lined up to sell their stocks, some even at a discount, hoping to cash out and avoid further losses. To make matters worse, Li Jianguo received news that a local mid-sized property developer, fearing a stock market crash, planned to sell its HK$5 million worth of blue-chip stocks to raise cash. "If local conglomerates follow suit and withdraw, our market support line will be breached!" Li Jianguo exclaimed urgently.

Zhou Jin stared at the Hang Seng Index chart, his fingers tapping rapidly on the table, his mind racing. He immediately dialed an encrypted video call. Shen Mingyuan and members of the Financial Stability and Development Committee of the State Council were already waiting in front of the screen, the emergency command center in the background brightly lit. "Professor Shen, the short sellers have turned their attention entirely to the stock market. The Hang Seng Index has fallen below 12000 points, and some local conglomerates are showing signs of wavering." Zhou Jin spoke quickly but clearly. "We must adjust our strategy immediately and concentrate our funds on supporting blue-chip stocks—financial, real estate, and utility stocks have large market capitalizations and good liquidity. Holding onto them will stabilize the index and boost market confidence."

Shen Mingyuan nodded in agreement, his gaze sharp: "The State Council has approved the use of 800 billion yuan to form a market stabilization fund pool, in conjunction with the Hong Kong Monetary Authority, the mainland social security fund, and state-owned banks. You are in charge of frontline command, and you must ensure precise allocation. In addition, an authoritative statement should be issued through the Ta Kung Pao and Wen Wei Po, clearly stating that China will continue to support Hong Kong's financial stability and stabilize market expectations."

"Understood!" Zhou Jin hung up the phone and immediately deployed the operation. "Li Jianguo, you contact the Chinese General Chamber of Commerce and have Chairman Li meet with that wavering real estate developer. Tell him that the funds to support the market are in place, and that following the trend to sell off will only result in losses. Huayao Capital can cooperate with him on high-quality projects in the future. At the same time, contact the media and release the State Council's support statement tonight, emphasizing that foreign exchange reserves are Hong Kong's strongest backing."

He turned to the encrypted phone and gave instructions: "Huayao Capital, launch a stock market support and bottom-fishing plan. First tier, use 15 billion yuan to buy HSBC Holdings in batches today; second tier, use 10 billion yuan to target Hong Kong Telecom; third tier, use 8 million yuan to invest in high-quality local real estate projects and buy up unsold properties. All transactions will be conducted through offshore accounts to avoid short-selling monitoring."

That afternoon, the market-stabilizing funds officially entered the market. Zhou Jin coordinated with the Hong Kong Monetary Authority to open a dedicated trading channel, injecting HK$800 billion into the market in batches and at different price levels. When HSBC Holdings' share price fell to the key support level of HK$60 per share, billions of Hong Kong dollars in buy orders suddenly emerged, instantly pulling the share price back to HK$63; Hong Kong Telecom also stopped its downward trend with the support of the market-stabilizing funds. At the same time, the Ta Kung Pao published a statement on its front page entitled "China Will Do Everything in Its Power to Safeguard Hong Kong's Financial Stability," clearly stating that "the State Council has prepared sufficient ammunition to resolutely crack down on malicious short-selling behavior," and market panic was initially contained.

Zhou Jin wasn't idle either. He opened his personal stock account, looked at the remaining 300 million yuan, and decisively withdrew another 200 million yuan from the profits of his Hong Kong dollar forward contracts, totaling 50 million yuan. He invested all of it in two stocks—Tencent, with a market capitalization of only 5000 billion yuan, and HSBC Holdings, which was severely undervalued. "Tencent's social media sector has huge potential. After the Hong Kong financial crisis, these kinds of technology companies will inevitably see a valuation recovery; as a pillar of Hong Kong's financial system, HSBC's short selling is only a short-term shock," he muttered to himself, buying 1000 million shares of Tencent stock in one go and increasing his holdings of HSBC Holdings by 50 shares. At the same time, he sold 500 Hang Seng Index futures contracts to hedge against the risk of a possible further decline in the stock market, practicing the wisdom of "maintaining the right path while seeking unexpected opportunities."

On August 8th, short sellers launched a counterattack, joining forces with more overseas hedge funds to sell off Hang Seng Index constituent stocks, causing the Hang Seng Index to fall below 12000 points again, dropping to 11800 points. The wavering local real estate developer was again rumored to be selling off, and Zhou Jin immediately drove to his company. "Mr. Zhang, selling now is tantamount to cutting your losses and leaving the market," Zhou Jin said, showing him data on the flow of funds used to support the market and Huayao Capital's bottom-fishing plan. "The blue-chip stocks you hold are all high-quality assets. China's market support funds are flowing in continuously, and Huayao Capital is also buying heavily. The stock price will inevitably rebound soon. If you are willing to hold on, we can give you priority in cooperating with Huayao Capital on subsequent urban redevelopment projects."

The data and sincerity impressed the other party, and Mr. Zhang immediately stated: "Mr. Zhou, I believe you! Not only will I not sell, but I will also contribute HK$2 million to support the market with you!" As the news spread, more local conglomerates abandoned their plans to sell, and some even joined the market support efforts, further consolidating market forces.

In the following days, the battle between bulls and bears intensified. Bears launched concentrated attacks at the opening and closing times each day, attempting to break through key levels; while Zhou Jin flexibly adjusted his market support strategy based on market changes—concentrating funds to defend support levels when bears were aggressive; and slowing down fund deployment when the market was stable, allowing Huayao Capital to quietly acquire quality assets. Huayao Capital's operations became increasingly precise: through three offshore subsidiaries, it cumulatively acquired 5% of HSBC Holdings for HK$15 billion; acquired 3% of Hong Kong Telecom for HK$10 billion; and also bought a prime property project in Kowloon from a real estate company for HK$8 million, a project that had been sluggish due to the financial crisis, with prices only half of its peak value.

On August 10th, the Hang Seng Index stabilized at the 11000-point mark. Zhou Jin judged that short-selling funds were nearly exhausted and immediately ordered increased intervention from market-stabilizing funds. Simultaneously, he instructed state-owned banks in Hong Kong to provide HK$10 billion in liquidity support to local businesses through their Hong Kong branches to alleviate their financial pressure. Market confidence continued to recover, retail investors began to return, and institutional funds also entered the market to buy on the dip, causing the Hang Seng Index to steadily rise.

At the close of trading on August 12th, the Hang Seng Index closed at 12500 points, up 1500 points from its low of 11000, successfully recovering most of its losses. In the liaison department's analysis room, team members cheered. Li Jianguo handed over a new report: "Director Zhou, the short sellers' Hang Seng Index futures positions have been closed out. We've won this stock market battle! The assets that Huayao Capital bought at the bottom have seen a 10% increase in valuation, with unrealized profits exceeding 300 million yuan; your personal account, including Tencent and HSBC shares plus futures hedging gains, has yielded a total profit of 8 million yuan!"

Zhou Jin looked at the numbers on the report, a hint of relief on his face, but he did not let his guard down. He picked up his encrypted phone and reported the situation to Shen Mingyuan: "Teacher Shen, the stock market has stabilized and rebounded, but the short sellers have only temporarily withdrawn. They will most likely turn to the real estate market or the derivatives market. We cannot let our guard down."

Shen Mingyuan's voice came through, full of approval: "Xiao Jin, well done! The State Council has approved it, and an additional 500 billion yuan will be allocated to stabilize the market. Huayao Capital needs to quickly digest the assets it has bought at the bottom, while closely monitoring the real estate market. The short sellers are likely to target the real estate bubble next."

After hanging up the phone, Zhou Jin walked to the window, gazing down at Hong Kong at night. The lights of Victoria Harbour were still dazzling, but he knew that this financial war was far from over. The Qingtian stone seal in his pocket was slightly warm, the four characters "Upholding Integrity and Seeking Innovation" constantly reminding him: only by safeguarding the bottom line of national interests could he gain the upper hand in the subsequent game. He opened the notebook Chen Panpan had sent, turned to the page with the maple leaf specimen, and wrote a line: "Victory in the stock market, my original intention remains unchanged, awaiting my triumphant return."

He then turned and walked into the analysis room, addressing his team in a deep voice: "Everyone, take a half-day break. Starting tomorrow, we'll focus on monitoring the flow of funds in Hong Kong's property market and the cash flow of local real estate companies. The short sellers won't give up easily; we must prepare for the next battle!"