Chapter Seventeen: A Triumphant First Battle, Earning Over Forty Million

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In a huge office on the top floor of Hongfeng Tower in Shen'an City—the headquarters of Liu Zhe's Hongfeng Group—Liu Zhe finished the work at hand and suddenly remembered the investment in Yan Fei. Glancing at the time, he saw that it was already half past three, so he opened the A-share market and began to study the day's movements.

A massive green candlestick leapt into view, making his heart sink. The domestic A-share market had behaved exactly as Yan Fei had predicted. Not only had it failed to rebound and rise, but it had also suffered a massive plunge. The market's future development might indeed unfold just as Yan Fei had said.

Liu Zhe then opened the Shanghai copper futures chart. He saw that the contract had fallen by five percent, opening sharply lower with a huge gap and fluctuating at low levels throughout the day. Trading volume had reached as many as 160,000 contracts. Once again, Yan Fei had been right—the price of Shanghai copper had indeed plunged.

Seeing how perfectly accurate both of Yan Fei's predictions had been, Liu Zhe grew increasingly interested in him. He picked up the phone and called.

“Kid, your predictions are pretty accurate. How many contracts of Shanghai copper did you short?”

Yan Fei laughed when he heard this. “President Liu, I didn't short Shanghai copper. I went long on 3,600 Shanghai copper contracts.”

“What?”

Liu Zhe's face turned cold, and his brows drew tightly together.

“Can't you see that Shanghai copper is in a downtrend? Why would you go against the market? It seems I'll have to seriously consider whether to withdraw my investment in you.”

Yan Fei remained completely unfazed. He gently reassured him, “President Liu, don't rush. Of course I know Shanghai copper is in a downtrend, but tomorrow it will definitely open higher and continue rising. I intend to make a very short-term trade.”

Yan Fei's words gradually calmed Liu Zhe's anger. After a moment, he asked in a low voice, “Are you certain it will open high and continue higher? Don't let it turn out like today's CSI 300 Index, which opened low and kept falling, suffering a tremendous decline.”

“I'm not certain,” Yan Fei replied. “President Liu, please don't be angry. Although I can't guarantee that it will open high and continue rising, I am certain it will open higher. As long as it does, I'll close my position immediately and then reverse direction to short it.”

After pondering for a while, Liu Zhe chose to believe him.

“I hope your judgment is correct. Otherwise…”

The two exchanged a few more words before hanging up. Yan Fei shook his head helplessly, his resolve to make money growing stronger. Only money of his own could ensure that his investment decisions would not be interfered with.

After tidying up his things, Yan Fei took his laptop and left. He hailed a taxi to Huaxin Securities. An hour later, he arrived outside the Huaxin Securities building. Looking at the familiar structure, he was overcome by complicated emotions.

He walked to the reception desk and smiled at the two young women there.

“My name is Yan Fei. I'm here to see Li Feng. Please let him know.”

Since Yan Fei had given a name, one of the receptionists took out the employee directory and called Li Feng from the desk phone.

“President Li, a Mr. Yan Fei is here to see you. He's waiting at the reception desk in the lobby.”

Li Feng frowned when he heard this. It had been nearly two weeks since Yan Fei had resigned from Huaxin Securities. He had been extremely busy and had not paid attention to how Yan Fei was doing. He had no idea why Yan Fei had come to see him.

After thinking for a moment, Li Feng said, “Ask him to wait. I'll be down shortly.”

After putting down the phone, Li Feng's impression of Yan Fei remained fixed in the past. He assumed Yan Fei had probably come to borrow money, so he decided to lend him several tens of thousands of yuan as a gesture of support from his senior fellow apprentice.

Li Feng left his office and went downstairs. When he reached the lobby, he stood beside the elevator and called out to Yan Fei, waving him over.

The moment Yan Fei saw him, he hurried over with a broad smile.

“Uncle Li.”

Li Feng nodded and led him upstairs. When they reached the office, Yan Fei sat down opposite him and smiled.

“Uncle, I heard the Growth Enterprise Market is scheduled to launch at the end of October. Has the list of the first twenty-eight companies been finalized?”

“Why are you asking about that?”

Li Feng frowned slightly and looked at him in confusion.

Yan Fei smiled. “Uncle, I want to participate in the offline subscription as a qualified individual investor. I have roughly two hundred million yuan in capital. Do you think you could help arrange it for me?”

Li Feng stared at Yan Fei in shock, as though he were meeting him for the first time. Only after a long while did he recover.

“You're not joking, are you? Where did you get two hundred million yuan? I remember that you came from a poor family.”

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Yan Fei nodded and smiled.

“I wrote two songs and sold one each to Eason Chan and Jay Chou, which brought me two million yuan. After that, I operated in the crude oil futures market, the CSI 300 Index market, and the Shanghai copper futures market, earning the rest through my trades during this period.”

After hearing this, Li Feng said nothing. He immediately opened the international crude oil futures chart and studied it for a while. Then he raised his head and looked at Yan Fei gravely.

“Two weeks, and a hundredfold return? That's impossible. The market's range of fluctuation isn't large enough to support such enormous profits.”

Then Li Feng suddenly thought of something. His expression became stern.

“You engaged in high-frequency trading. That's illegal! You're a highly talented finance student. How could you make such a basic mistake?”

Seeing the anguish on Li Feng's face, Yan Fei felt deeply moved.

“Uncle, rest assured. I understand the relevant financial regulations very well. I did not engage in high-frequency trading. Your guess is correct in one respect, though: I haven't yet earned two hundred million yuan. But before the end of October, before the subscription funds have to be paid, I will absolutely be able to raise that amount.”

Li Feng fell silent for a moment. Looking at Yan Fei's confident expression, he asked seriously, “How much have you earned so far? And why are you so confident that you can make two hundred million before the subscription funds are due?”

After calculating carefully, Yan Fei replied, “Approximately forty million yuan. In addition, I received a total of 115 million yuan in investment from President Liu and a friend.”

“President Liu?”

Li Feng thought for a moment before speaking.

“You mean Liu Zhe of Hongfeng Group? You didn't sign an investment agreement, did you? Given your current status, you can't personally accept investments. Remember to sign a loan agreement.”

Yan Fei nodded with a smile.

“Don't worry, Uncle. I know all that. We can't do anything illegal. We signed a loan agreement at the prevailing market rate, so there won't be any problems.”

Only then did Li Feng relax. His emotions gradually settled, though he remained astonished by how Yan Fei had transformed into an investment prodigy. Yet the facts were right before his eyes, and he could only revise his understanding of Yan Fei.

After a long silence, Li Feng said, “The list of companies for this batch of Growth Enterprise Market offerings has basically been finalized. The total financing amount should be around fifteen-point-six billion yuan. Relevant personnel and the major securities firms will probably take roughly seven billion. Fifty billion has to be reserved for online subscriptions. That leaves about thirty-six billion for qualified individual and corporate investors. You want a quota of two hundred million, which is practically impossible. I'll do my best to arrange it, but how much you can secure will depend on the actual circumstances.”

Yan Fei understood that Li Feng was speaking frankly and realistically, so he nodded earnestly.

“Understood. Then I'll trouble you, Uncle. Let me take you to dinner tonight. You choose the place.”

Li Feng agreed. Yan Fei stood and left.

There had been no actual discussion of personal benefits between them, because that would have been illegal. Li Feng was merely helping Yan Fei arrange matters within the bounds of legality and compliance. That way, neither of them would encounter any trouble.

After returning home, Yan Fei watched the international crude oil futures market for a while. He saw that the price had risen to 32.90 and was still climbing only slightly, more or less as he had expected. He shut down the computer and began reading books on finance.

Immersed in the ocean of knowledge, Yan Fei lost all sense of time. Before long, evening arrived, and Li Feng called to tell him to go to Junhaoyue Grand Restaurant.

Carrying his laptop, Yan Fei left the apartment, hailed a taxi, and headed straight for the restaurant. When he entered the private dining room, he saw Li Feng seated at the table with two other middle-aged men, chatting cheerfully.

Yan Fei quickly walked to Li Feng's side and greeted them with a smile.

“Uncle, and you two esteemed elders, I'm here.”

Li Feng glanced at him, pointed to the seat beside him, and then smiled at the other two men.

“Commissioner Zhang, Section Chief Li, this is Yan Fei, my senior apprentice-brother's most outstanding student. I treasure him dearly. He has extraordinary talent in both finance and investment.”

The two men smiled at Yan Fei in a friendly manner. Section Chief Li spoke first.

“Professor Chen An's prize student? For Professor Chen An to praise you so highly, you must possess exceptional talent in finance, Young Yan.”

Yan Fei immediately stood and smiled respectfully.

“You flatter me, Uncle Li. Whenever my teacher comes up, I feel ashamed. He always wanted me to pursue graduate studies under him, but my ambition lay in commercial investment. I disappointed his expectations.”

Seeing that Yan Fei had successfully established rapport with the two men, Li Feng immediately continued.

“My nephew really is remarkably talented at investing. With a principal of two million yuan, he earned forty million in barely two weeks through the international crude oil futures market and the domestic stock-index futures market. He can be regarded as one of the most outstanding young investors of his generation.”

Commissioner Zhang and Section Chief Li stared at Yan Fei in astonishment. The fact that Li Feng dared to speak of it openly meant that Yan Fei had not been trading on inside information but had achieved those results through genuine ability. A rare investment prodigy of this caliber was virtually priceless. Once he matured, the value of the connections he could offer would be equally immense.

Seeing their shocked expressions, Yan Fei immediately raised his wineglass.

“Uncle Li, Uncle Zhang, let me offer you both a toast. There are a few small matters on which I hope I can ask for your guidance.”

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Commissioner Zhang and Section Chief Li took small sips. Yan Fei drained his glass in one go, then smiled.

“I have two hundred million yuan in idle capital, and I want to participate in the offline investment allocation for the Growth Enterprise Market. How can I obtain the largest possible share?”

After a moment of thought, Commissioner Zhang smiled.

“Young Yan, you're a highly gifted finance student. As everyone knows, in offline subscriptions for newly issued shares, the highest bidder gets the shares. But that approach can also result in heavy losses. Generally speaking, a bid close to the issue price is best, while those who submit larger orders are certain to receive more shares. If subscriptions exceed the available amount, the qualified applications will enter a distribution pool and be allocated in proportion to the amounts each applicant requested.”

Yan Fei immediately understood what Commissioner Zhang meant. With an expression of gratitude, he raised his wineglass again.

“Thank you for your guidance, Uncle Zhang. I'll finish mine; please drink at your own pace.”

Commissioner Zhang watched Yan Fei empty his glass, and the smile on his face grew even broader. He was highly satisfied with Yan Fei's perceptiveness and conduct. In a lively atmosphere, the group finished the meal.

After dinner, Li Feng went to see Commissioner Zhang and Section Chief Li off, while Yan Fei went to settle the bill. When Li Feng returned, Yan Fei immediately thanked him.

Li Feng merely smiled and said lightly, “It's taken care of. Wait for my notice.”

Yan Fei thanked him again, watched him leave, and then hailed a taxi back to his rented apartment. After a quick wash, he fell into bed and did not wake until the following morning, when the sky was already bright.

He checked his phone and saw that it was nine o'clock. Yan Fei sprang out of bed, washed quickly, ran downstairs to buy two steamed buns, and wolfed them down. Then he opened his laptop and pulled up the Shanghai copper futures market.

It was already 9:15 a.m., and the September 2011 Shanghai copper contract had opened. Seeing the opening price of 48,200 yuan per ton, Yan Fei immediately closed all 3,600 of his long contracts at 48,200, dumping them onto the market. He had expected the move to drive the price down and deliver a devastating opening blow to the bulls.

The market reacted in a way Yan Fei had not expected. The price of Shanghai copper fell by only twenty yuan, stabilizing at 48,180. Then more than a dozen massive bullish orders, each involving a thousand contracts, surged in. They not only absorbed Yan Fei's liquidation orders but also drove the price directly toward 48,300.

Staring at the market's sharp upward surge, Yan Fei saw that events had unfolded exactly as he had predicted: the contract had opened high and continued rising. Without further hesitation, he deployed all the funds in his account at a ten-percent margin ratio.

In less than a minute, the 85 million yuan in principal in Yan Fei's account, together with his 7.2 million yuan in profits, gave him a total of 92.2 million yuan. He successfully shorted the entire amount, at an average execution price of 48,350, establishing 3,805 short contracts.

After finishing his Shanghai copper operation, Yan Fei immediately opened the CSI 300 Index futures market. The index had opened at 3,110.71 and had continued falling during the first few minutes. It had now dropped to 3,089.56.

Yan Fei stared at the market with tightly furrowed brows. At that level, he noticed that the bears' strength had practically vanished. More than ten seconds had passed without a single substantial bearish order hitting the market.

His instincts told him that something had happened—something he did not yet understand. Without the slightest hesitation, Yan Fei closed all 377 of his short contracts.

The enormous liquidation order instantly destroyed the bears' final resistance. The CSI 300 surged upward, and large quantities of short orders above were rapidly absorbed.

A few seconds later, all 377 of Yan Fei's short contracts had been successfully closed at an average execution price of 3,097.54. The CSI 300 Index had also been driven up to 3,100.85, successfully reclaiming the 3,100-point mark.

Looking at the 60 million yuan in principal and 35.92 million yuan in profits in his account—after more than fifty thousand yuan had been deducted in fees and commissions—Yan Fei remained as calm as still water. His mind raced as he considered whether to reverse direction and go long.

After reflecting for a while, he abandoned the idea. He closed the CSI 300 chart and began searching online for information about the A-share market.

Before long, Yan Fei found a video of Chairman Liu of the China Securities Regulatory Commission delivering a speech.

After watching it, Yan Fei understood that Chairman Liu was warning the A-share market that its decline was nearly over. Short sellers and institutions needed to beware of the risks. Malicious short selling was prohibited, or unpredictable market risks would follow.