Chapter 66

February 23, 1995, 10:15 AM, the Pujiang Securities Exchange opened for trading.

The 327 Treasury Bond Futures jumped directly from yesterday's closing price of 148.21 to 149.50. Even with 40 billion in massive short orders appearing on the market to suppress it, it was to no avail; the price quickly rushed to near 150 yuan, then the bulls and bears engaged in repeated tug-of-war until the market closed at noon.

When the market reopened at 1:00 PM, the skyrocketing trend appeared once again. Within a short 10 minutes, the price of the 327 Treasury Bond surged from around 150 yuan to 151.98, after which it began to fall back slightly.

When Di Ye had been building his position over the previous few days, he had preset a liquidation price of 151.88 yuan. When the price touched this number, the computer automatically matched the trade. He immediately picked up the phone, dialed the Big Brother he had left with Huang Ya before leaving, and said, "Xiao Ya, everything went smoothly, the mission is accomplished!"

Huang Ya didn't say a word, only emitting a sob of joy.

Di Ye held the receiver, letting Huang Ya fully release the immense pressure brought on by misappropriating such a huge sum of money over the past few days. After a moment, he said, "When I return to Yuncheng tomorrow, I'll accompany you to buy a house that belongs only to us; we will never do such risky things again."

Huang Ya still couldn't speak, sobbing as she gave a soft "mm."

"My position-building cost this time was 148.15, the liquidation price was 151.88, with 40x leverage, the return is exactly 100%, earning 23 million, which is enough for us to use for a long time. Didn't you say you wanted to open your own company..."

Di Ye used the method of reciting numbers to slowly soothe Huang Ya's emotions. After she calmed down, he hung up the phone, packed up his Notebook Computer and several books, and called over the Manager for major clients to have him handle the transfer of funds, account closure, and other related chores.

"Mr. Di, it is now 1:15 PM, the afternoon futures market has just opened, and you are stopping now?"

"It is already over; there is no point in staying any longer."

The Manager for major clients tried to persuade him a few more times, but seeing that Di Ye insisted on closing the account, he moved with lightning speed to run to the proprietary trading room of Haitong Securities to report to Tang Renrong.

Tang Renrong was in the midst of frantically directing his subordinates to call Gao Ling, the chairman of Liaosheng Guofa, when he heard that Di Ye had already liquidated his position and was preparing to close his account and leave. He was startled and asked incoherently, "At what price did he liquidate... no, I mean, when did he liquidate?"

"Around 1:10 PM, I think."

Tang Renrong looked down at the K-line chart on the computer screen and muttered to himself, "He liquidated just as it hit the highest price. Could it be that he thinks it won't rise anymore?"

A trader nearby shook his head and said, "Impossible. According to the treasury bond interest rate announced by the Ministry of Finance last night, the price should rise to at least 155."

"Even if it rises, it won't go up in a single day!"

Tang Renrong retorted, telling several traders to continue calling Gao Ling, while he himself hurried to Di Ye's trading room. After buttering him up for a while and setting the right mood, he asked, "Mr. Di, now that you have liquidated, you don't need to keep it secret anymore. Can you reveal the reason for going long this time?"

"It was just a simple numbers game..."

"327" is the code for the Treasury Bond Futures contract at the Pujiang Securities Exchange, corresponding to the treasury bonds issued in 1992 and maturing in June 1995, with a face interest rate of 9.5% and a maturity redemption price of 128.5 yuan.

Due to the severe inflation that occurred domestically between 1992 and 1995, in order to protect the interests of treasury bond buyers, the People's Bank of China and the Ministry of Finance successively issued announcements in July 1993, declaring that they would provide value preservation for unmatured treasury bonds. This was divided into two parts: one called Value Preservation Subsidy, and the other called Interest Subsidy.

Among these, the Value Preservation Subsidy is calculated based on the value preservation subsidy rate released by the People's Bank of China on the 10th of each month. The value preservation subsidy rate for February 1995 was 10.38%. Calculated this way, the Value Preservation Subsidy for the 327 Treasury Bond for the two years of 1994 and 1995 is 20.76; 128.5 plus 20.76 equals 149.26 yuan.

"Besides the Value Preservation Subsidy, there is also the Interest Subsidy. Currently, the three-year deposit interest rate is 12.24%, while the treasury bond interest rate is only 9.5%. The interest spread between the two is 2.74%, and the two-year Interest Subsidy is 5.48. Combined this way, the reasonable price for the 327 Treasury Bond should be around 155 yuan, and the price a few days ago was only a little over 148 yuan. Going long was a guaranteed profit."

What Di Ye said seemed complex, but for those working in the securities industry, it was common knowledge—1+1=2. However, Tang Renrong's expression was very serious as he asked, "Mr. Di, the Value Preservation Subsidy changes every month, and everyone can calculate it, but the Interest Subsidy is not certain. How did you know the Ministry of Finance would provide an Interest Subsidy for the 327 Treasury Bond?"

"This is even simpler. When the treasury bonds were issued, the Ministry of Finance clearly stated in the announcement that it would guarantee that the treasury bond yield would not be lower than the interest rate of bank savings deposits for the same period. The Ministry of Finance is a core state institution, and its credit is extremely important. How could it slap its own face?"

Tang Renrong was silenced by this, because he and his colleagues and peers had repeatedly studied that announcement recently. Most people thought the Value Preservation Subsidy was already very high, and it was unlikely the state would spend several billion more to issue an Interest Subsidy for the 327 Treasury Bond under such tight fiscal conditions. Now, hearing Di Ye say this, he felt it made a lot of sense, so he asked, "Since that's the case, Mr. Di, why stop now? The price of 327 hasn't broken through 152 yuan yet, and it's still a long way from 155 yuan."

"Things are simple by nature, but they become complicated once interests are involved, especially interests of billions or tens of billions. Pujiang is full of hidden talents, and I'm just a small shrimp. It's safer to quit while I'm ahead and leave the market early."

Di Ye politely declined Tang Renrong's repeated attempts to keep him and insisted on closing the account. Tang Renrong had no choice but to instruct the Manager for major clients to comply, then gave him a personal business card to facilitate future contact.

"Manager Tang, I will be studying for my doctorate at Yun University for the next year. If you go to Yuncheng for business or travel in the future, you must contact me. I will treat you to some local specialty dishes."

"Certainly, certainly."

After the Manager for major clients finished the paperwork, Di Ye walked out of the Haitong Securities business hall and headed to the Pujiang Securities Exchange located on the first floor of the Lichas Hotel to meet up with Xia Fangfei, who was waiting outside.

Upon seeing Di Ye, Xia Fangfei held up her Camera to claim credit, saying, "I just took photos of Guan Jinsheng and Teng Wei coming out of the exchange with dark faces. They'll definitely sell for a lot of money later."

Seeing her standing on the side of the road, ignoring the cold wind, looking high-spirited, Di Ye couldn't help but laugh and asked, "You know Teng Wei too?"

"Of course. Teng Wei is the General Manager of the Wanguo Securities Fund Management Headquarters. I've seen him a few times at the Paramount Hotel. He and Guan Jinsheng were so busy they didn't even have time to eat lunch; they rushed here to find the General Manager of the Securities Exchange, Wei Wenyuan. You can tell just by looking that they lost a lot of money on the 327 Treasury Bond and can't take it anymore."

Before coming to Pujiang, Xia Fangfei knew nothing about the financial world. Now, not only did she know what Treasury Bond Futures were, she could also casually name Teng Wei and Wei Wenyuan and their positions. Di Ye was surprised by her progress and praised her, "You really have a talent for being a reporter. You've figured out all the big shots in the Pujiang financial circle so quickly."

"Can't help it. These finance people are all very flashy. They especially like to show off in front of beauties like me, always bragging about knowing this person or that person."

"Are the people from the China Economic Development Trust and Investment Corporation like that too?"

"They are managed too strictly; they don't accept any interviews. They're very annoying."

Di Ye chatted with Xia Fangfei on the side of the road for a while. Seeing an Audi car drive over and stop at the entrance of the Lichas Hotel, two middle-aged men carrying briefcases stepped out. He took the Camera, snapped a few photos of the two, and then said, "You can't go inside while the Securities Exchange is open; it's pointless. Let's go do something else."

Xia Fangfei didn't recognize the two men just now and thought Di Ye was just taking pictures for fun. She asked, "Is it over already?"

"What follows is a battle between gods; we can't get involved, so we might as well go do something else. Anyway, you've already collected all the information you needed these past few days."

Xia Fangfei was still in the excitement of witnessing history and said, unsatisfied, "A battle between gods is exactly what's worth watching. It's such a pity to leave just like this."

"There are only two places to watch the battle between gods: one is Wei Wenyuan's office at the Securities Exchange, and the other is the proprietary trading room of Wanguo Securities. We can't get into either of these places, so..."

Xia Fangfei cut off Di Ye's words, revealing a triumphant smile, and said, "Who says we can't get in? I can get into the proprietary trading room of Wanguo Securities."

Di Ye was greatly surprised and asked, "How will you get in?"

Xia Fangfei used his own methods against him, imitating the tone Di Ye used when speaking, and waved her hand, saying, "You don't need to worry about how I get in; you just need to watch the show. Now let's hail a taxi back to the Paramount Hotel."

When Wanguo Securities was first established in 1988, it was tucked away in a narrow storefront at the intersection of Wanhangdu Road near Jing'an Temple. It only moved to the Paramount Hotel a few years later, from which it embarked on its glory, becoming the undisputed leader in the domestic securities market. Therefore, they treated this place as a lucky spot. Later, when the company headquarters moved to Ruijin First Road, they kept the trading headquarters in the 6th to 8th floors of the Paramount Hotel.

Among them, the 6th floor is the general trading hall, providing stock trading services for small retail investors, which anyone can enter and exit. The 7th floor is the major client trading area, with security guards at the entrance, requiring major client credentials to enter. The 8th floor houses the high-level offices of Wanguo Securities and the proprietary trading room; without an invitation, no non-company employees are allowed to enter.

Xia Fangfei returned to the suite at the Paramount Hotel, changed into a Wanguo Securities employee uniform she had obtained from somewhere, then called an inside contact and walked openly into the 8th-floor proprietary trading room of Wanguo Securities with them.

"This girl, she's quite talented!"

Chapter 66: Calculations