Chapter 27: Three Consecutive Daily Limit Rises in Three Days

Following Professor Wang Xingbang’s advice, Zhang Yang finally initiated his second trade in his mock portfolio the next day: he sold off his Baosteel shares and used the full position to buy shares in China Construction Bank and Agricultural Bank of China.

Buying bank stocks during a restorative bull market was a move that completely contradicted professional textbooks. Existing investment theory textbooks often cite the "seesaw" relationship between the banking sector and the securities sector—when banks rise, securities must fall, and if securities rise, then banks must fall.

However, textbooks are not always right. Current investment textbooks are largely based on Western stock markets and their case studies. In the U.S. market, banking and securities do indeed move like a seesaw. This is because Americans generally have a low savings rate; they tend to spend their money on travel and consumption as soon as they earn it, and almost everyone carries a credit card. Furthermore, wealthy Americans do not simply leave their money in banks; they entrust it to fund managers, allowing professional institutions to handle their investments. In such a social environment, American banks only demonstrate their utility during economic downturns.

China is entirely different. The Chinese people are famously thrifty. Regardless of whether the economic climate is good or bad, household savings continue to rise steadily. This has indirectly fueled the prosperity of bank lending, making bank stocks the most important anchor for the A-share market and the foundation of its major indices. If one were to copy the U.S. investment model into the A-share market, they would 100% lose everything down to their underwear; conversely, applying the A-share investment model to the U.S. market would yield the same result.

The returns from the mock portfolio were not massive, and Zhang Yang did not want to expend too much energy, so he simply chose the more stable bank stocks for his investment.

As for the real-money account and Lai Weijie’s mock account, Changan Automobile hit another limit-up, with over a million buy orders locked in; no further action was required. Meanwhile, on Baidu Tieba, discussions about Changan Automobile were heating up, with more and more posts appearing.

[Ghostly Apparitions]: Changan Automobile hit another limit-up. Whose "hot money" (speculative capital) is behind this? How could they possibly move such a large-cap stock?

[King of Shabak]: Could it be the legendary big-time traders "Brother Zhang" and "Brother Zhao"? But the active trading seats don't match up.

[Years of Serenity]: It’s definitely not them. They usually target small-cap stocks for market manipulation. They don't typically play with heavyweights like Changan Automobile.

[Wandering Son]: The key is that you never know how many other speculators and institutions are lying in ambush in a leading stock. If you force a rally, they might just dump their shares on you.

The chatter among retail investors not only pushed Changan Automobile onto the Tieba trending list but even onto the trending topics of Sina Weibo, Tencent, and NetEase Finance channels, drawing wider attention and exposure.

Far away in Shenzhen, Chen Sanrong witnessed the stir on the internet. He quickly opened a QQ chat group and typed: "The target stock is trending. We need to decide on an exit date immediately, or we’ll risk getting hit by the 'iron fist' of regulation."

Moments later, other speculators responded.

[Nanyang War Song]: Exit tomorrow?

[Chancheng Shadowless Kick]: No rush. I bought 200,000 worth of press releases; they’ll start circulating tonight, framing this as a 'value correction.' Let’s see what the other speculators do first.

[Stock-Trading Breadwinner]: I’m a bit worried that Changan’s management might stir up trouble. They are desperately short of cash right now. If they announce a high-price secondary offering, all our efforts from this period will be in vain.

[Ghostly Enchantment]: You’re just cowardly. We’ve been positioning for two months; we can’t just stop after making a lousy million!

[Seeing the Bright Moon]: Let’s see how the market reacts after the press releases hit. I’m leaning toward a gradual exit; otherwise, the cost is too high.

The sudden exposure from the trending list created a rift among the seven speculators who had ignited the rally, all of them debating whether to cash out. If they exited tomorrow, each of them could walk away with a million in profit. If they didn't, each additional day of rising prices meant hundreds of thousands more in floating profit.

...

At the same time, at the Changan Automobile Group headquarters, in the Chairman’s office, the Board Secretary, Xie Yatong—dressed in a sexy, tight-fitting office skirt and nude-colored stockings that accentuated her slender figure—was reporting the capital market situation to Chairman Xu Ping.

"Mr. Xu, while you were inspecting the Chongqing market, our stock experienced significant volatility. Over the last two trading days, it didn't just hit the limit-down and then recover to the limit-up—it hit the limit-up again today. We cannot rule out manipulation by speculative capital or institutions."

"Limit-down to limit-up..." Xu Ping sighed in surprise.

To be able to hammer Changan Automobile down to the limit-down, the other party must have been lying in ambush for at least half a month, or even several months, to accumulate shares. Only by holding the chips can you manipulate an A-share crash.

The "securities lending and short selling" mechanism later criticized by retail investors was only reviewed and passed on July 5, 2011, and implemented on October 26 of that same year. Before October 26, 2011, there were no similar channels in the A-share market to borrow shares and drive down prices; shorting could only be done through stock index futures. This was why, upon hearing about the "limit-down to limit-up" reversal, Xu Ping immediately suspected a long-planned scheme.

"Should we issue a risk disclosure?" asked Secretary Xie Yatong.

"No. It’s only been two limit-ups; it’s just returned to its value range. If it hits three more, we might consider a high-price secondary offering," Xu Ping said calmly.

For investors, the stock market is a game of capital, but for listed companies, it is a money bag. When the A-share market was established on December 19, 1990, its purpose was to provide large amounts of development capital for listed companies. It wasn't just the A-shares; the British and American stock markets also functioned solely for financing at the beginning. It was only later that people discovered their investment attributes, leading to the birth of countless financial derivatives and strategies.

"Understood." Xie Yatong nodded slightly. She knew Xu Ping was planning something big, and she said nothing more.

...

Night fell, and silence descended. As the last sliver of light was obscured, the ink-black sky draped over most of China like a massive velvet cloth.

The speculator known as "Chancheng Shadowless Kick" hadn't lied. Near 8:00 PM, a massive wave of press releases erupted online.

"Rise of Domestic Automobiles! Changan Automobile Sales Hit New Record; Yuexiang Model Ranks First in March Domestic Sales!"

"Auto Leader Hits Two Consecutive Limit-Ups: Value Correction or Market Hype?"

"Is the End of Japanese Cars Here? Surge in Demand for Domestic Cars in Guangzhou Used Car Market; Changan Automobile Takes the Lead!"

"Latest Breaking News! Toyota and Honda Groups Hold Emergency Meetings Due to Continued Shrinkage of Market Share in China!"

The news was a mix of truth and fabrication, sweeping across the Chinese internet. Many clueless retail investors actually believed that Changan Automobile had already challenged veteran foreign carmakers like Toyota and Honda, and they began cheering for the rise of domestic industry.

...

Wednesday, April 8th.

With the fermentation of the news from the previous night, the speculative capital and institutions pushed the stock to another limit-up. The number of locked buy orders reached 1.3 million, 300,000 more than the previous day.

Three days, three limit-ups. Changan Automobile drove the entire automotive sector upward. SAIC Motor, Dongfeng Motor, and FAW Car all saw gains of around 3%, and even Geely Automobile, listed in Hong Kong, soared by 5.6%.

The collective rise of the automotive sector not only filled the pockets of the speculators but also made Lai Weijie the center of attention in the investment major.

[Xu Zhiruo]: Oh my god, Changan Automobile hit another limit-up! Three days, three limit-ups. Lai Weijie, how did you pick this stock?

[Wang Liu]: Entering the top ten of the major in three trading days—that is just too crazy. Brother Jie, you kept quiet, but when you finally made a move, you stunned everyone!

[Yin Shichang]: I’m impressed. It feels like Changan Automobile can go even higher. Is Weijie going to surpass Sister Jing and become the top student in our year?

[Lu Lixuan]: Brother Jie, please take us with you!!!