Becoming the King of Bottom Fishing After Going All-In on A-Shares

Chapter 108 Interest Rate Cut

On Wednesday, October 29th, Lu Chenzhou was woken up at six in the morning by his phone vibrating.

It wasn't a phone call, it was a news notification.

One after another, they swept in like machine guns.

He opened his eyes, picked up his phone from the bedside table, and the screen was blindingly bright.

He squinted for a moment, waiting for his eyes to adjust to the light before starting to look at the notifications.

The first point comes from Bloomberg: The Federal Reserve cut interest rates by 50 basis points to 1.00%, the lowest level since 2004, fueling expectations of coordinated interest rate cuts by central banks around the world.

The second report comes from Reuters: U.S. stocks surged overnight, with the Dow Jones Industrial Average closing at 9065.12 points, up 889.35 points, or 10.88%, marking the third-largest single-day gain in history.

The third point comes from Sina Finance: Global central bank interest rate cut expectations are rising, and Asia-Pacific stock markets opened higher across the board, with the Nikkei 225 index opening more than 6% higher.

The fourth point comes from the Hong Kong Economic Journal: Hang Seng Index futures opened more than 700 points higher in pre-market trading, with the market anticipating a continued rebound today.

Lu Chenzhou put down his phone, leaned against the headboard, and stared at the ceiling.

Interest rates have been cut.

It's not just an expectation, it's already happened.

The Federal Reserve cut interest rates from 1.50% to 1.00%, a reduction of 50 basis points.

This is not standard procedure; this is crisis mode.

The Federal Reserve did this after 9/11 in 2001.

They did the same thing after the Iraq War in 2003.

Every time, it's during the most panicked time in the market.

He quickly went through it in his mind: US stocks rose 10.88% last night, the third largest single-day gain in history.

When were the previous two? The New Deal in 1933 and after Black Monday in 1987.

Every time, it's during the most panicked time in the market.

Each time, it's the moment when the rebound is strongest.

But each time, it wasn't the bottom.

He picked up his phone and glanced at the Hang Seng Index futures data again.

It opened more than 700 points higher and had already reached around 13400 in pre-market trading.

Yesterday's closing price was 12702 points, a 5.5% increase from the opening price.

He has already come up with the script for today.

At seven o'clock sharp, when Lu Chenzhou ran back early, Xia Yaozong was still snoring.

Zhang Yixing had finished washing up and was sitting at the table with a laptop in front of him, displaying financial news on the screen.

He turned around when he heard Lu Chenzhou open the door.

"You've arrived?"

"Um."

"US stocks rose 10 points last night, did you see the news?"

"I've seen it."

Zhang Yixing hesitated for a moment: "Hong Kong stocks will most likely open higher today, and our current positions..."

"Don't move," Lu Chenzhou interrupted him. "No operations today."

Zhang Yixing paused for a moment, then said, "Aren't we going to do anything? Hong Kong stocks rose 14 points yesterday, and they'll most likely pull back today. Shouldn't we do something?"

Lu Chenzhou walked into the restroom, his voice coming from inside, muffled: "Short selling is suicide, going long is chasing highs. Doing nothing is the best strategy."

Zhang Yixing sat at the table, staring at the bathroom door, thinking for a long time.

He thought Lu Chenzhou was right.

But he couldn't quite explain why it was right.

It was a strange feeling, not because he understood, but because he believed.

At 7:25, when Lu Chenzhou arrived at the west gate of Renmin University, Wen Zhiyu was already waiting.

She was wearing a dark gray coat, her ponytail was neatly tied, and she was carrying two insulated bags.

Seeing Lu Chenzhou walk over, she handed him one of the insulated bags.

"Millet and pumpkin porridge, eggs, four vegetarian steamed buns, and two sesame seed cakes. There's no meat today."

Lu Chenzhou took the insulated bag and glanced at her.

How did you know I wanted to eat vegetarian today?

"I don't know," Wen Zhiyu said expressionlessly, "but I know you frowned when you ate meat yesterday."

Lu Chenzhou's lips twitched slightly. He opened the insulated bag, took out the porridge, and took a sip.

"Let's go."

The two walked side by side toward the science park.

On a late autumn morning, there weren't many people on campus, with only one or two students occasionally passing by on their morning run.

After walking a few dozen steps, Wen Zhiyu suddenly spoke.

Lu Chenzhou.

"Um.

""

"US stocks rose 10 points last night, what will happen to Hong Kong stocks today?"

Lu Chenzhou thought for a moment.

"Opened higher, then fell, and recovered a little at the close."

Wen Zhiyu turned her head to look at him: "How did you know?"

"Because it rose too much yesterday, some people want to take profits today. A gap up is the best opportunity to sell. But the positive impact of the interest rate cut hasn't been fully digested yet, so it won't fall too deeply."

He paused for a moment, then said, "Most likely, a cross pattern."

Wen Zhiyu didn't ask any more questions, because she knew that Lu Chenzhou was usually right.

At 8:10, when Lu Chenzhou pushed open the door to Room 608 of the Renmin University Cultural and Technological Park, Xia Yaozong had already arrived.

He leaned back in his chair, holding a cup of soy milk, and was looking at his phone.

He looked up when he saw Lu Chenzhou come in.

"Brother Lu, Hong Kong stocks rose more than 5% in pre-market trading today."

"I saw it."

"The China National Building Materials stock we hold closed at 1.85 yesterday, and it was already at 2.00 pre-market."

China Construction Bank (CCB) is at 3.23, and 3.40 pre-market.

ICBC is at 3.26, and pre-market price is 3.50.

"

He paused, a hint of uncertainty in his voice: "Brother Lu, won't you sell some?"

"Not for sale."

Xia Yaozong opened his mouth, wanting to say something, but seeing that Lu Chenzhou had already sat down and turned on the computer, he swallowed his words.

Zhang Yixing followed him in, carrying a stack of printed press releases. He placed the papers on the table and sat down next to Lu Chenzhou.

"These are the key points from the morning meetings of various organizations this morning, which I have compiled."

Lu Chenzhou took the stack of papers and flipped through them.

Goldman Sachs: Hong Kong stocks are overbought in the short term; recommends reducing positions on rallies.

Morgan Stanley: The rebound is unlikely to be sustainable; we maintain a cautious view.

Citigroup: Market sentiment has improved somewhat, but the fundamentals have not yet bottomed out.

CICC: Hong Kong stocks are now at historically low valuations, and their long-term investment value is becoming apparent.

He put the stack of papers aside.

What they say doesn't matter.

"Then what's important?" Xia Yaozong asked.

"The market's trajectory," Lu Chenzhou said, "is not the path the analysts write down."

At 8:45, more and more people were entering room 608.

Today is Wednesday, October 29th, and Hong Kong stocks are trading normally.

The fundraising is over, the money has arrived, the positions have been established, and everyone is waiting.

Let's see how the market performs today, and how Lu Chenzhou operates.

Wen Zhiyu stood by the window, holding the notebook in her hand. She turned to a new page and wrote down the date: Wednesday, October 29th.

She wrote a few words in the header: Hong Kong stock market pre-market: Hang Seng Index futures opened more than 700 points higher.

Then she stopped and waited for the market to open.

Zhang Yixing sat in front of the computer, with a Hong Kong stock market real-time quote system in front of him.

Chen Ke is not in Beijing, but transactions can still be placed online.

The funds are in a Hong Kong account, and the trading instructions are issued from Beijing and sent directly to the Hong Kong Stock Exchange through the online trading system.

This is the norm in modern finance; it doesn't require anyone to be in Hong Kong.

"Who placed an order today?" Zhang Yixing asked.

"Me," Lu Chenzhou said.

He opened the trading software, entered his account and password, and the holdings interface popped up on the screen.

Six stocks, with a market value of 23.7 billion, and a floating profit of 3.7 million.

He glanced at it, closed it, and switched to the market data page.

At 9:15 AM, the Hang Seng Index opened at around 12950 points, about 248 points higher than yesterday's closing price of 12702 points, representing a gain of 1.95%.

This increase is significantly lower than the 5.5% increase in pre-market futures, indicating that some people started selling off their holdings during the opening auction phase.

Lu Chenzhou stared at the screen without saying a word.

China National Building Materials opened at HK$1.95, 5.4% higher than yesterday's closing price of HK$1.85.

China Construction Bank opened at HK$3.30, up 2.1%.

Industrial and Commercial Bank of China (ICBC) opened at HK$3.35, up 2.8%.

Bank of China opened at HK$2.15, up 2.9%.

China Shenhua HK$10.50, Gao Pi 5%.

Conch Cement, HK$16.80, and Gao Pi, 2.9%.

Zhang Yixing calculated on the side: "The six stocks have an average increase of about 3.5%, and the unrealized profit at the opening today is already seventy to eighty million."

""

Lu Chenzhou did not respond.

At 9:30, Hong Kong stocks officially resumed trading.

The Hang Seng Index opened at 12927.63 points, up 225.87 points from the open.

This number is slightly lower than the 12950 during the joint bidding, indicating that some people frantically sold off their holdings the moment the market closed.

On the order book, two forces are locked in a battle.

One group consists of foreign investors liquidating their positions, while others are buying stocks.

Following yesterday's surprise inspection by the Hong Kong Securities and Futures Commission, major foreign banks such as Goldman Sachs, Morgan Stanley, Huagou, and UBS have all closed out their short positions in response to regulatory scrutiny.

Closing a position means buying; this is a buying order.

The other group consists of retail investors taking profits.

Those who jumped on the bandwagon yesterday, seeing the high profits today, chose to cash out and secure their gains.

This is a sell order.

Buying and selling orders are intertwined, like two armies facing off.

The six stocks held by Lu Chenzhou showed a clear divergence in their post-market performance.

China Shenhua saw the most dramatic rise, starting at 10.50 and quickly surging to 11.00, a gain of nearly 10%.

Conch Cement followed closely behind, opening at 16.80 and surging to 17.50, a 4% increase.

The four major bank stocks were much more moderate. China Construction Bank (CCB) consolidated at 3.30, then stopped at 3.35, with a gain of less than 2%.

China National Building Materials was the weakest performer, starting at 1.95, rising to 1.98, and then starting to fall.

"There are people selling building materials." Xia Yaozong stared at the betting odds.

Zhang Yixing leaned over for a look: "The volume isn't large, but it's been consistently selling. Retail investors are selling; those who bought in yesterday are taking profits today."

Wen Zhiyu continued writing in his notebook. At 9:35, the building materials stock rose and then fell back, reaching a low of 1.92. The stock price remained flat, and Lu Ge did not make any moves.

9:40 a.m., Goldman Sachs Asia Trading Room.

Cheng Jiajun stared at the trading screen; China National Building Materials was fluctuating around 1.92.

"Boss, someone's taking over the building materials business. It's QFI's Xi Jing; they've been buying them."

Wei Zhexuan walked to the screen and glanced at the betting odds data.

Her complexion wasn't good, and she had very dark circles under her eyes.

I spent the whole day yesterday dealing with your closing positions and didn't get much sleep.

"What did the China Securities Regulatory Commission say?" I asked.

Cheng Jiajun lowered his voice: "They visited our trading room yesterday and requested to submit all documents related to short selling transactions. Although no formal case has been filed, they've got their eyes on us."

Wei Zhexuan remained silent for a few seconds.

What happened yesterday came too suddenly.

On October 27, Hong Kong stocks plummeted 12.7%, with the Hang Seng Index falling below 11000 points.

On the morning of October 28, representatives from the Hong Kong Securities and Futures Commission appeared at the trading rooms of several major foreign banks, including Goldman Sachs, Morgan Stanley, and Huagou.

It wasn't a meeting, it was a surprise inspection.

They requested the submission of documents for all short selling transactions to verify whether there was any abuse of short selling.

The market exploded the moment the news broke.

Those foreign banks that had previously engaged in aggressive short selling began frantically liquidating their positions in response to regulatory investigations.

Buy stocks to close out short positions.

This is how Hong Kong stocks surged yesterday, October 28th.

The Hang Seng Index was pulled up from below 11000 points to 12596 points in one day, a gain of 1600 points, or 14.35%.

"This time it's for real." Wei Zhexuan's voice was deep. "We have to close out our short positions, not because we want to, but because we have no choice."

Cheng Jiajun nodded and entered the closing order into the trading system, buying China National Building Materials.

At 9:45 a.m. in the Morgan Stanley trading room, Richard Gray was also sitting at his trading desk, with a list of documents that the Securities and Exchange Commission had requested to be submitted the day before spread out in front of him.

The assistant stood beside him, his voice low: "Boss, the people from the China Securities Regulatory Commission stayed in our trading room for three hours yesterday."

They reviewed the short-selling records of all Chinese stocks, focusing on China National Building Material, China Construction Bank, and Industrial and Commercial Bank of China.

""

Gray didn't speak. He stared at the betting odds data on the screen.

"Close all positions," Gray said. "Close all short positions in Chinese stocks today, no more waiting."

The assistant paused for a moment, then asked, "All of them?"

"All of them." Gray's voice was unwavering. "They're watching us. We can't afford any problems at this time."

At 10:00 AM, China National Building Material was fluctuating around HK$1.90.

On the order book, foreign investors' closing buy orders and QFII's opening buy orders overlapped, forming a strong buying pressure.

However, at the same time, retail investors continued to sell.

Those who jumped on the bandwagon yesterday saw the price increase today and took profits.

With buying and selling forces evenly matched, the stock price fluctuated between 1.88 and 1.95.

Xia Yaozong couldn't help but blurt out, "Brother Lu, the building materials price has been hovering around 1.90 all morning, aren't you going to buy some?"

"No need to add more," Lu Chenzhou said. "I bought enough yesterday at a cost of 1.60. Now it's 1.90, a floating multiplier of 18%. There's no need to add more."

"6

At 10:15 a.m. in Goldman Sachs' Asian trading room, Wei Zhexuan checked the order book; China Construction Bank's stock price had fallen from 3.30 to 3.25.

It's not because someone is dumping shares, but because a large number of retail investors are selling.

"How much empty space does China Construction Bank still have?" Ya asked.

Cheng Jiajun checked: "Approximately 1800 million shares."

"Draw it all, today it's all Ping Le."

Cheng Jiajun nodded, entered the closing instruction into the system, and bought China Construction Bank shares.