Rebirth of the Hong Kong Millennium Conglomerate

Chapter 68 Stock Fraud

In early March 1973, the Hong Kong stock market was caught up in a frenzy at a high of 1700 points. Long lines stretched out day after day outside the Sheung Wan Stock Exchange, and the talk of the town was full of fervent predictions of "breaking through 3 points".

However, Qian Gu Securities exudes a calmness that is completely different from the outside world.

Outside the floor-to-ceiling windows, ferries shuttle through Victoria Harbour and rows of high-rise buildings stand side by side. Inside, the lights in the trading room have not been turned off before 3 a.m. for four consecutive months.

When the last stock transaction record displayed "Transaction Successful" on the electronic screen, the trader, Lao Zhou, let out a long sigh of relief. He raised his hand to rub his bloodshot eyes, his voice filled with barely concealed exhaustion and excitement: "Manager Su, the last batch, all cashed out and left the market."

Sitting in the main seat, Su Qing slowly raised her hand to take the transaction report handed over by Lao Zhou. Her eyes swept over the dense numbers. Fourteen months, a full one hundred and twelve days and nights. From the moment Zhang Zeyang gave the instructions, the core operations team of Qian Gu Securities focused on only two things: borrowing shares and then selling them.

Currently, the report states: "Cumulative stock loans: over 170 companies, totaling 236 million shares; Cumulative cash-out amount: 47..."

With the words "HK$8900 million" appearing, the first phase of this plan has come to a perfect end.

"Notify the team that they are on holiday for three days to rest and recuperate."

However! I must emphasize one point: confidentiality. You have all signed agreements!

Su Qing's words caused the trading room, which had been tense for four months, to erupt in a long-suppressed cheer.

Several young traders high-fived each other, while Old Zhou slumped in his chair, staring at the ceiling with a relieved smile.

Looking at her excited subordinates, Su Qing thought to herself: Last year, the Hang Seng Index soared, and the market was in a frenzy. Bank credit was loose, and a nationwide stock market craze was brewing. Even newspaper vendors on the street were talking about "new stock subscriptions."

But then her boss dropped a bombshell plan: "To short sell on a massive scale!"

At the time, she considered the plan almost insane.

Short selling is common in the stock market, but large-scale stock lending and selling is undoubtedly going against the entire market.

Over the past few months, Qian Gu Securities has been frantically borrowing shares from various listed companies. The trading team dared not delay for a moment after each share was acquired.

Zhang Zeyang's ironclad rule was: "Once you receive a stock, you must sell it all within 24 hours."

In the trading room, the traders had clear divisions of labor: some were responsible for monitoring real-time stock prices, some for splitting sell orders, and some for coordinating with the exchange to confirm transactions.

To avoid large-scale selling that could cause stock price fluctuations, they split each sell order into dozens or even hundreds of smaller orders, dispersing them across different trading sessions and quietly selling them at the market average price or slightly below it.

On one occasion, the team borrowed 15 shares of a popular small-cap stock, which they were required to sell within a day according to the plan.

However, the stock saw unusually active buying that day, causing the price to rise steadily. The traders hesitated, wanting to wait for a higher price before selling.

Upon learning of this, Zhang Zeyang immediately rushed to the trading room and decisively ordered: "Sell immediately, even if it's below the current market price! Don't pursue the maximum profit in a single transaction."

Over the course of four months, Qian Gu Securities Company frantically borrowed shares to sell off, and some rumors circulated in the market.

Someone noticed the unusual activity of Qiangu Securities and anonymously published an article in a financial media outlet, implying that "a small brokerage firm is engaging in large-scale short selling, disrupting market order."

For a time, many institutional and individual shareholders began to have doubts about Qiangu Securities' request to lend shares. However, the market was doing very well, and they were more than happy to have institutions lend them shares; it would be foolish not to make money.

At Qiangu Securities, not only do borrowed stocks need to be returned, but interest and other fees also need to be paid.

Therefore, institutions, individual shareholders, and banks are all willing to lend shares to Qiangu Securities, and they don't care whether Qiangu Securities is shorting the stock.

Now, with the final stock sale completed and funds withdrawn, Qian Gu Securities has finally temporarily escaped the effects of market volatility. The HK$4.789 billion raised was divided into two parts by Zhang Zeyang: one part was deposited into Qian Gu Bank.

The other part is used to repay the interest and handling fees incurred from borrowing shares.

Three days later, team members returned to their posts one after another. The atmosphere in the trading room became tense again.

This time, however, they were no longer busy borrowing and selling shares, but closely monitoring every minute fluctuation in the Hong Kong stock market.

On the electronic screen, the Hang Seng Index began to rebound slightly after a brief plunge, but in Zhang Zeyang's view, this was nothing more than a last gasp before the collapse.

He tapped his fingers lightly on the table, already having decided on his next plan: wait patiently until the oil crisis was triggered and the stock market hit rock bottom, then Qian Gu Securities would enter the market to buy back shares.

At this moment, most investors in the Hong Kong stock market are still immersed in the fantasy that "a rebound means a reversal," completely unaware that a much bigger storm is quietly approaching.

On March 9, 1973, before the morning mist in Hong Kong had completely dissipated, long queues had already formed outside the stock exchange.

Office workers in white shirts, vendors riding tricycles, wealthy women wearing pearl earrings, and even retired teachers with graying temples all clutched crumpled purchase orders or bulging wallets, their eyes burning with almost fervent anticipation.

Inside the exchange, the green numbers on the electronic display screens flickered like dancing flames, and the Hang Seng Index finally settled at 1774.96 points.

"Breaking two thousand! It's definitely going to break two thousand!" In the trading hall, a middle-aged man in a gray suit held up a trading record sheet, his voice hoarse with excitement.

The crowd around him immediately erupted in cheers, some slamming their fists on the table, others embracing each other, the air thick with the smells of sweat, tobacco, and the stench of money.

This marks the thirteenth consecutive trading day of gains for the Hang Seng Index. Since 1970, the index has soared from 221.91 points, with the gains multiplying several times over, making "getting rich through stock trading" no longer a legend, but a reality that is within reach for everyone.

In the teahouse, the customers who used to talk about horse racing and Cantonese opera now talk about "price-to-earnings ratio" and "delivery date".

In the factory, workers secretly listened to stock market information on radios, while office workers slipped away to the stock exchange to place orders during their lunch break.

Even school teachers would gather after class to exchange stock-picking tips.

Hong Kong seemed to have become a giant wealth-creating machine, and everyone firmly believed that they could catch this fast train to the pinnacle of wealth.

At that time, the Hong Kong stock market was in the midst of a frenzied prediction of the "Year of the Ox". In the first 47 trading days, it surged from 843 points to 1774 points, an increase of 110%, while two years earlier the Hang Seng Index was still hovering around 200 points.

Loose bank lending continues to inject capital into the stock market. In the past eight months, the growth rate of bank lending has doubled compared to the same period last year, which is highly consistent with the trajectory of the index surge. However, few people have noticed that some foreign capital has been quietly cashing out and leaving the market. In the first two months alone, more than 30 billion yuan of foreign capital flowed out, and the baton has been passed to local capital that relies on credit.

At that time, the Hong Kong stock market had long since deviated from fundamental support and fallen into a frenzy of nationwide speculation.

Competition among the four stock exchanges was fierce, and the listing threshold was lowered. In 1972, as many as 93 new companies were listed, and many companies with no real business were able to go public and raise money based solely on their concepts.

Just like "Hong Kong Antenna" company, whose prospectus clearly stated that "it has not yet started operations and there is no guarantee of future dividends," its share price soared from HK$1 to HK$33.5 due to the TV antenna concept, ultimately becoming an international laughing stock.

Some little-known small companies can see their stock prices soar several times in just a few days based on a vague "overseas investment plan".

Some companies don't even have any actual business operations; they can attract countless investors to rush to buy shares simply because of their impressive names.

Inside the exchange, brokers were incredibly busy, their phones ringing incessantly, and orders pouring in like snowflakes. Many brokers had lost their voices, yet they still couldn't hide the excitement on their faces.

Every transaction means a hefty commission, and this frenzied market seems to have no end.

Newsstands on the streets and alleys saw a surge in sales of financial newspapers, with front-page headlines filled with news of "stock market hitting new highs" and "new stocks being hotly sought after," accompanied by pictures of happy-looking investors, further encouraging more people to invest in the stock market.

Some people mortgaged their properties, some embezzled public funds, and some even borrowed money at exorbitant interest rates, all in an effort to get a share of the profits in this bull market.

In their eyes, the stock market is not an investment venue where risks and returns coexist, but a cash machine that guarantees profits. And 1774.96 points is just a stepping stone to 2000 points and 3000 points.

Even though the Governor's Office had publicly warned that the stock market was "overheated," the Banking Authority had asked banks to restrict stock lending, and the stock exchange was forced to implement cooling measures such as market closures, none of this could shake the speculative enthusiasm of investors.

However, just as the nation was celebrating and the stock market was reaching its peak, a deadly crisis was quietly brewing in the shadows.

After the market closed on March 9, Chen Jingming, an employee of the exchange's clearing department, checked the day's transaction vouchers as usual. He has been in the industry for eight years and has handled no less than 3 stock vouchers. He is very familiar with the stock formats and anti-counterfeiting features of major companies.

Around 8 p.m. that evening, while processing a batch of stock settlement slips for Hopewell Holdings, his fingertips suddenly paused on these three Hopewell Holdings stock certificates with a face value of 1,000 shares each. The paper was slightly thinner than that of normal stock certificates, and the paper felt rough, lacking the suppleness characteristic of genuine stock certificates.

He initially thought it was a printing batch issue, but when he held the stock chart up to the light for a closer look, cold sweat instantly soaked his back:

The company seal of Hopewell Holdings should have shown a fine grid pattern when held up to the light, but the seals on these three stock certificates are solid blocks of color.

The anti-counterfeiting watermark "Hehe" in the lower left corner of the stock certificate should normally be tilted at a 45-degree angle to be clearly visible. However, the watermark on these three stock certificates looks unusually abrupt when viewed straight, and the edges are also blurred with smudges.

More importantly, the font thickness of the stock code is uneven, and the spacing between the last two digits is significantly wider than that of a normal stock code by half a millimeter. This is a flaw left by the forger in his hasty imitation.

Chen Jingming immediately picked out these three stocks separately and then retrieved other recent transaction vouchers of Hehe Industrial from the inventory for comparison.

He discovered that all three stock transactions came from the same brokerage firm, with the buyers being three unrelated retail investors, while the seller information was vague, only marked as "over-the-counter transfer".

With his professional instincts, he realized that this was no accident and immediately dialed the phone number of Li Weiqiang, the head of the liquidation department.

When Li Weiqiang arrived at the exchange, Chen Jingming had already compiled more suspicious points: the printing ink on these three stocks had a pungent smell, which was completely different from the water-based ink used by the banknote printing plant that Hehe Industrial had long cooperated with.

On the back of the stock certificate, the signature in the transfer registration section deliberately imitated the handwriting of an official registrar, but the beginning and ending strokes revealed signs of amateurishness.

The two dared not delay and contacted the securities department of Hehe Industrial overnight. The filing sample sent by the other party confirmed their judgment—the three stock certificates were indeed forged.

Hopewell Holdings, a real estate company with considerable strength at the time, achieved a profit of over HK$60 million in 1973, demonstrating excellent performance. Its stock was a hot commodity in the bull market, but unexpectedly, it became the target of counterfeiters.

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