Chapter 47 Capital Breakthrough 190,000

Time flies, and today is April 20th, Grain Rain.

Grain Rain is the sixth of the twenty-four solar terms and the final solar term of spring, derived from the saying, "rains nourish the hundred grains."

At this moment, Shanghai is engulfed in torrential rain, accompanied by rumbling rolls of spring thunder.

Shanghai University of Finance and Economics.

Wudong Road Campus.

With only three trading days remaining until the conclusion of the "Huaxin Simulated Trading Competition," the simulated portfolio returns among the senior finance majors are gradually beginning to diverge.

He Jing, currently in first place, has reached a return rate of 58.4%, just a hair's breadth away from the 60% mark.

The student in second place, Zheng Shaohui, performed quite averagely for the first twenty-five trading days, maintaining a stable ranking around thirtieth.

However, as the end of the competition drew near, like the majority of students, he rushed to the top gainers list to chase after rising momentum and hot themes.

Ultimately, by getting in on Kaile Technology (which has since been delisted), he captured a 15% surge, breaking past the 50% return milestone in a single bound.

In third place is Qi Junze, who similarly climbed into the 50% return tier by chasing top-board rallies for a 14% gain.

Aside from these two students who managed to squeeze into the top ten through momentum-chasing and limit-up boarding, every single other student who engaged in market fads suffered extremely severe losses without exception.

Among them, a female student named Liang Qi incurred a staggering loss rate of 60%, placing dead last, and was specifically criticized by Professor Wang Xingbang as a textbook case of investment failure.

...

At 13:42 in the afternoon.

The Financial Analysis Room in the library.

Dressed in a tight gray knitted spaghetti-strap tank top paired with black hot pants and black knee-high boots, He Jing exuded an aura of effortless elegance as she walked over to Zhang Yang carrying two iced Americanos. "Here, your half-sweet iced Americano."

"Thanks."

Zhang Yang expressed his gratitude and continued monitoring the market.

Over the five trading days of the previous week, the four major state-owned banks he bought into earlier, along with ST China Textile Machinery, had all achieved decent gains.

After entering ST China Textile Machinery on April 10th at the 11.28 yuan limit-up price, his returns over the subsequent five days were...

April 13th: 1.77%, share price at 11.48.

April 14th: 4.97%, share price at 12.06.

April 15th: -1.33%, share price at 11.89.

April 16th: 1.17%, share price at 12.03.

April 17th: 0.93%, share price at 12.14.

From 11.28 yuan to 12.14 yuan, the account showed a gain of 7.62%.

Worth mentioning, however, is that today—April 20th—the main capital in ST China Textile Machinery directly locked up 60,000 lots of buy orders during the morning session, driving the stock to a 5% limit-up price of 12.75 yuan.

Entering the limit-up board with a 20,000 yuan principal, the total six-day gain came to 13.03%, bringing his profit on ST China Textile Machinery to 2,606 yuan.

As for the 120,000 yuan invested in the four major banks, Zhang Yang held them for only two trading days. A low opening in the morning session of the third trading day prompted him to liquidate and exit without the slightest hesitation, securing a cumulative gain of 3.7% and a total profit of 4,440 yuan.

After selling off the four major banks, Zhang Yang used 124,000 yuan, combined with the 40,000 yuan remitted by Tao Yangang—totaling 164,000 yuan—to actively trade intraday swings ("do T") across stocks like Baoshan Iron & Steel, Ping An of China, and Shaanxi International Trust. Over three trading days, he captured a 2.6% return, and his securities account funds grew at a pace visible to the naked eye.

As for He Jing, since she needed to prepare market research reports for Zhang Yang, she simply moved her stock trading to the library's financial analysis room as well, allowing her to consult Zhang Yang whenever necessary.

Through this give-and-take, a unique tacit understanding formed between the two of them.

Initially, He Jing was quite surprised to discover that Zhang Yang was trading with real money, but gradually she realized that not only was he trading with a real-money account, but he was also concurrently managing the simulated accounts of Lai Weijie and Xu Zhiruo.

Instead of prying, she found herself in awe of the terrifying feat of multitasking three accounts at once.

...

"Rumble—"

Outside, lightning flashed and thunder roared amidst a torrential downpour.

Many students, even with umbrellas, dared not venture out of the library hastily; seeking shelter from heavy rain was common sense known even to primary schoolers.

As three o'clock in the afternoon arrived, Zhang Yang looked at the newly closed A-share market and let out a long breath, his tense nerves finally relaxing at that moment.

Staring at the stock tickers was intensely draining, and managing three securities accounts simultaneously left him feeling genuinely drowsy.

Fortunately, after selling off the Huaxin Securities shares he had picked up at a low price yesterday and netting another two thousand-plus Chinese yuan, the funds in Zhang Yang's real-money account had reached 190,900 yuan, of which 27,600 yuan represented profits generated entirely through stock trading.

At this point, his actual holdings consisted of...

ST China Textile Machinery: 22,606 yuan.

China Shenhua Energy: 40,000 yuan.

China Yangtze Power: 40,000 yuan.

One-day Treasury bond reverse repurchase: 88,000 yuan.

He Jing, glancing at Zhang Yang's portfolio holdings from the side, asked with some surprise, "You've rotated all your positions into defensive sectors?"

"The broader market has seen shrinking trading volume for three consecutive days, and the banking sector is similarly shrinking after being heavily hyped by the market. To play it safe, I'm buying some coal and utilities to anchor the portfolio," Zhang Yang explained, detailing his rationale.

So-called defensive sectors refer to those where market demand for the companies' businesses is highly stable and largely immune to the drastic fluctuations of economic cycles.

The most commonly cited examples are banking, utilities, and coal. Should the broader market undergo a downward correction, the fundamental earnings of these sectors provide excellent defensive attributes against declines.

Take the coal sector, for instance. As of April 20, 2009, according to publicly disclosed first-quarter national energy data, thermal power generation accounted for 81.81% of total power generation, with an installed capacity of 651 million kilowatts, representing 74.49% of total installed capacity. It is fair to say that China's electricity supply is virtually entirely fueled by burning coal.

Since it relies on combustion, the financial performance of coal enterprises is predictably more stable than other types of businesses.

Moreover, with May just around the corner and national temperatures gradually rising, residential electricity demand would simultaneously increase.

"The risk index is indeed rising. The broader market rose by 2.14%, yet the MACD indicator shows shrinking volume, and the DIFF and DEA lines are about to converge. If we fail to print a matching major bullish candle tomorrow, I'd predict a pullback as well," He Jing said, sharing her perspective after reviewing the market data.

"Exactly."

Zhang Yang nodded slightly, picking up the thread: "And most crucially, the broader market came down from the 6,000-point peak. Countless locked-in shares are waiting above to break even; it's impossible to simply yank the market straight back up."

In his past life as a fund manager, he had specifically studied retail investor psychology.

Many retail investors who have been trapped for a long time actually harbor only a single thought: to run the moment they break even.

For instance, if someone bought at 10 yuan and got trapped at 8 yuan, and the main market makers spend 10 trading days dragging the stock price back up to 10 yuan, the retail investor will often refuse to sell their shares immediately because they will expect the price to continue rising.

To make retail investors obediently surrender their shares, market makers will tacitly execute a sideways consolidation pattern.

If you won't sell during a one-month consolidation, or a three-month consolidation, what about a half-year or even a year? Will you sell then?

Many retail investors might claim they would never sell, refusing to let go no matter the price.

Yet in actual trading, who can truly maintain that resolve?

Usually, patience gets steadily worn down, and the moment the trading day hits their break-even price, they scramble frantically to liquidate and exit.

There is an old saying in the stock market: "The longer the consolidation, the wilder the surge."

It means the longer the sideways movement, the more retail investors get shaken out. With fewer retail investors left, the market makers become all the more willing to drive the price upward.

To take a step back, if you were the main capital looking at the massive volume of retail shares trapped above the 6,000-point level, would you be willing to use your own hard-earned money to help them break even?

Obviously not.

The stock market is no charity; it is a domain saturated with human nature and strategic combat.