Chapter 29: A-Shares Collapse
“Locking positions cos in two forms: profit locking and loss locking,” Lu Liang muttered as he prepared breakfast in the kitchen while studying London Gold trading strategies further.
“When the market moves against your position, you open a new position in the opposite direction. That’s why it’s called counter-locking.
"The main purpose is to manage potential intraday reversals, keeping your holdings in an optimal position at minimal cost.”
While the concepts of long and short trades were easy enough to grasp, the locking chanism was new to Lu Liang.
It sounded like a way to mitigate risks and reduce losses, but he felt it could also serve as a tool for maximizing profits rather than being rely a redial asure.
The descriptions were too vague, though. He realized he needed hands-on experience to fully understand its nuances.
Suddenly, the electric curtains opened, and the sound of soft, rhythmic footsteps ca from the hallway.
"Brother Liang, why are you up so early today? Didn’t you say I should make breakfast for you from now on?"
Li Manli appeared, her eyes half-closed with sleep. She wore pink pajamas adorned with a teddy bear design and fluffy bunny slippers whose ears perked with each step.
Recently, with little else to do, she had been binge-watching videos and suddenly wanted to try her hand as a cooking influencer.
Lu Liang, pleased to see her with ambitions of her own, bought her so professional filming equipnt and let her explore.
Now, besides being the housekeeper, Li Manli also played chef, taking charge of all his als.
Although her cooking skills weren’t particularly impressive, Lu Liang refrained from dampening her enthusiasm. Who knew? She might have a hidden talent and beco a famous influencer, a prospect that delighted him.
"Busy night. Might as well stay occupied."
After breakfast, Lu Liang walked over to the coffee bar to make himself an extra-strong cup of black coffee, steeling himself for what could either be a lightning-fast battle or a prolonged struggle.
He wanted to fuel up as much as possible before the action started.
Li Manli stared at him in shock. "You haven’t slept all night?"
"I’ll co out for food if I get hungry. Don’t bother calling for lunch," he said, laughing as he gently tilted her jaw back up. Then, he returned to his study.
The desk was arranged with three monitors: one showing the Shanghai Stock Exchange, another displaying London Gold charts, and a third dedicated to news feeds.
At 9:30 AM, the dostic stock market opened with a 0.57% gain, pushing the Shanghai Composite Index to 5150.12 points.
It was another day of widespread gains; almost every stock was in the green, with few exceptions.
One notable outlier was Chinese Online, which opened with a sharp 3.55% drop, trapping retail investors who had chased highs the previous day.
As ti passed, small individual investnts began to trickle in—a sign of retail investors’ unwavering faith in the stock’s future performance. They were convinced this was the next "storm stock" of the year, poised for explosive growth.
"They're wasting their final chance to escape and still dreaming that institutions will save them," Lu Liang sighed, shifting his focus to London Gold. 𝙍ÂＮȰΒЕś
An anomaly had occurred in the typically dormant Asian session: a sudden five-point drop in gold prices.
Were it not for Lu Liang’s $960,000 in margin, allowing him to withstand severe market volatility, his position might have been liquidated.
"Could it be starting?" He frowned, his eyes darting between the gold charts and the Shanghai Composite Index.
After a mont of deliberation, he adjusted his account settings.
Given his larger investnt this ti, Lu Liang reduced his leverage from 400x to 200x to lower the risk.
His account held $1.13 million, with $630,000 allocated as margin and $500,000 leveraged into $100 million in trading capital.
Lu Liang stood by his belief: the catalyst for gold’s rally was the inevitable collapse of A-shares, prompting a flight to safety into the international gold market.
Unlike the rigidly hierarchical dostic stock market, where even insiders with advance knowledge of policy changes had to feign ignorance until official announcents, the London Gold market operated freely.
Sudden fluctuations were often harbingers of significant developnts.
He decided to take a gamble. With his limited funds, he needed to act ahead of the curve to secure the best prices. Reacting after the market moved would make it nearly impossible to buy at the lows.
Lu Liang opened a position at $1365.2400 per ounce, purchasing 732 lots for a total of $99,918,000—nearly all-in.
At this price, a one-point increase in gold would net him $9,076 in profit.
While reduced leverage ant lower returns, it offered greater margin for error, allowing him to withstand up to a 17-point drop.
As the clock ticked, gold prices inched upward to $1365.7400 per ounce.
By 10 AM, Lu Liang had earned $4,538 in profits, though his assets still showed a floating loss of $12,962 due to the 3.5% transaction fee incurred from using leverage.
Fifteen minutes later, the Shanghai market suddenly plumted. The slow, steady gains of the "gentle bull" gave way to a precipitous drop.
The index, which had opened with a 0.57% gain and climbed as high as 0.95%, plunged 1.89% into the red.
In re seconds, 1.34 trillion yuan—a staggering amount—fled the 71.25 trillion yuan A-share market.
And this was just the beginning.
A breaking news alert spread like wildfire across financial forums:
At 10:15 AM, authorities issued an official directive targeting 12 private firms providing illegal margin financing. All such institutions were forcibly liquidated, while brokers were instructed to regulate operations under newly implented securities laws.
The Shanghai Composite Index imdiately nosedived. Forced liquidations by the affected institutions flooded the market with sell orders, while retail and institutional investors scrambled to exit.
"Damn it, my account is frozen!"
"Run! The crash is here!"
Forums were in uproar, and financial professionals were stunned.
In just four months, the Shanghai Composite Index had surged from 3,000 to a peak of 5,178 points, adding nearly 20 trillion yuan in market value.
This growth was heavily fueled by margin financing from countless private firms—an industry that had operated in a legal gray area. While technically illegal, regulators had previously turned a blind eye.
Now, with a decisive crackdown targeting top players in the sector, the market’s foundation crumbled.
For A-shares, it felt like the sky had fallen.
Institutions liquidated positions, speculative funds fled, and retail investors followed suit. The entire market resembled a doomsday scenario.
Lu Liang’s excitent reached a fever pitch. Ignoring the chaos in A-shares, his full attention was on the London Gold market.
At the exact mont the regulatory announcent hit, gold prices surged by 21 points, as massive funds poured into the safe-haven asset.
As the session progressed, gold prices climbed at a blistering pace, changing almost every second. Speculators from across the ocean joined in, driving prices even higher.
By 12 PM Beijing ti, the frenzy began to stabilize.
In just 80 minutes, gold had surged 47.39 points, settling at $1412.6300 per ounce.
International gold prices had jumped by $45 per gram, equivalent to 288 yuan—a 10-yuan increase per gram.
Clearly, investors going long on gold weren’t ready to let the montum die. News of the rally spread worldwide.
Dostically, financial experts scrambled to make their presence known, supporting the governnt’s market regulations and lanting the stock market’s plight.
They predicted that the trillions of yuan fleeing A-shares would flow into two areas:
First, the real estate market, where property prices were expected to rise further.
Second, gold, the only market besides real estate capable of absorbing such vast sums of capital.
dia narratives cleverly promoted real estate investnt, subtly steering funds toward governnt-preferred channels, while ntioning gold as a secondary option.
But for many, the cost of property—often in the millions—was prohibitive. In contrast, gold, priced at a few hundred yuan per gram, seed far more accessible.
Having tasted success in stocks, investors now saw gold as their next target.
In Shenzhen’s Shuibei district, gold shops were suddenly sward by eager buyers. Gold beca so scarce it was nearly impossible to find.
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