Chapter 8: Stock Market

The next morning, Xia Yu left for the day after finishing breakfast.

Instead of heading straight to the stock market, he went to HSBC with a large stack of cash. After setting up an account, he handed the money to the staff, who looked at him in astonishment. They hadn't expected a young man to produce such a large sum of money, much of it in small bills.

The staff suspected something might be amiss—after all, anyone would be suspicious of a young person with that much cash. But they didn't ask further questions, focusing on their duties and avoiding unnecessary trouble.

Xia Yu paid no mind to the staff's reaction. After finishing with the account setup, he left HSBC and headed for the Kowloon Stock Exchange.

Though it wasn't yet market opening time, the area outside the Kowloon Stock Exchange was already crowded. Seeing the bustling scene inside, Xia Yu smiled.

While Hong Kong hadn't yet become the international financial hub it would later be, signs of its emergence were visible, especially in the stock market.

The rise of the Hong Kong stock market had several reasons:

First, most of Hong Kong's population came from southeastern mainland China, where gambling and business are prevalent. This contributed to a vibrant stock market where nearly everyone was involved in stock trading, providing a substantial base of investors.

Second, Hong Kong's eventual status as an international financial center was also due to geographical factors. As a window to the mainland with a population of over a billion supporting it, Hong Kong's rise was inevitable.

In Hong Kong, stock prices were tracked using the Hang Seng Index, which had been publicly released by Hang Seng Bank in 1969.

The prosperity of the Hong Kong stock market was evident from the presence of four stock exchanges at the time: the Hong Kong Stock Exchange (established in 1947), the Far East Stock Exchange (established in 1969), the Gold and Silver Stock Exchange (established in 1971), and the Kowloon Stock Exchange (established in 1972). The Hong Kong United Exchange, which would later exist, had not yet begun operations and would only start in 1986.

Since Xia Yu lived in Kowloon, he chose the Kowloon Stock Exchange, given his limited funds. It didn't matter where he went.

"While the market isn't open yet, I'll buy some newspapers to see if there's any useful information," Xia Yu thought, heading towards a nearby newsstand.

The newsstand was busy, serving those who were well-off and understood the value of information. The newspapers were their primary source of news.

Xia Yu bought a copy of every newspaper available, paid, and left without wasting time.

He immediately started with the top newspaper, the *Sing Tao Daily*, flipping past the entertainment sections to focus on the economic and financial pages, quickly scanning and memorizing useful information.

Time flew by as Xia Yu concentrated on his reading.

After half an hour, Xia Yu had reviewed news and analyses from several newspapers and closed his eyes to reflect.

He carefully noted the accurate information from the newspapers and integrated it, finding useful insights for himself. However, he found the analysis provided by the editors lacking. Based on the memories of financial giants in his mind, he deemed the experts' analyses rather simplistic and filled with flaws. Even when correct, they were superficial and not useful to him.

Nonetheless, Xia Yu did find some unique insights in the analyses of major newspapers like the *Sing Tao Daily*, *The Ming Pao*, and others.

"The time has come; the market is open!" A voice announced from the Kowloon Stock Exchange, signaling the opening.

Xia Yu stood up, dusted off his pants, and walked into the Kowloon Stock Exchange. He discarded the newspapers he had bought; they had served their purpose and were no longer needed.

Inside the exchange, Xia Yu went to the HSBC Securities Investment Department to open a trading account.

After setting up his account, Xia Yu observed the trading hall.

Although it was 1978, many companies were already listed on the Hong Kong stock market. Most were large family-owned conglomerates, but some were emerging tycoons who had risen from humble beginnings.

Since many people in Hong Kong came from southeastern mainland China—regions with a strong business spirit like Zhejiang, Wenzhou, and Chaozhou—seeing individuals make a mark was quite normal.

With so many listed companies and limited time to analyze each, Xia Yu used the useful information from the newspapers to guide his search.

**Bluewater Commercial!**

That's the one!

Bluewater Commercial was a small company with a single business line and low risk tolerance. Its stock price was easily affected by any fluctuations. According to the newspapers, another company in the same field, Jiu Sheng Commercial, which was several times larger than Bluewater Commercial, had recently invested heavily in new product development. The news suggested that Jiu Sheng Commercial was about to release successful results.

Recently, Bluewater Commercial's stock price had also shown slight fluctuations, likely due to some early insider information. Xia Yu suspected that Jiu Sheng Commercial might be preparing to release news to take advantage of Bluewater Commercial and retail investors.

Therefore, Xia Yu had two options: buy Jiu Sheng Commercial expecting a rise or short-sell Bluewater Commercial expecting a fall. In other words, go long on Jiu Sheng Commercial or short Bluewater Commercial.

Given that Jiu Sheng Commercial was several times larger than Bluewater Commercial, even if Jiu Sheng had positive news, its rise wouldn't exceed the fall of Bluewater Commercial.

Thus, shorting Bluewater Commercial offered better potential profits. Moreover, Xia Yu planned to use five times leverage, which would significantly boost potential returns.

Of course, shorting also carried greater risk. If the stock price of Bluewater Commercial was manipulated to rise sharply by market manipulators, using five times leverage could lead to a margin call. The key was when Jiu Sheng Commercial would release its news.

However, risk and reward were intertwined. Based on his memories of financial giants, the risk of using five times leverage on Bluewater Commercial was minimal, so Xia Yu wasn't concerned about it.

Besides, the money came too easily. Even if he incurred a loss, he would be only slightly disappointed. He could always take another risk and make up for it in a day or two in Hong Kong Island.

After a final review and finding no omissions, Xia Yu went to the HSBC Investment Department. Ignoring the staff's surprised looks, he opted for full margin leverage, using 600,000 HKD to short Bluewater Commercial.

With 120,000 HKD of his own funds, Xia Yu was eligible to apply for five times leverage.

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