Chapter 175: Cuts Through the Mist

Bonds, frankly, are a glamorous yet frustrating investment in the financial world.
Not only are the bigwigs at major financial companies embracing them, but even many bored retail investors like to jump in, trying to compete with the professionals.
The problem is, this market is deeper than the Mariana Trench; a slight lapse in judgment can lead to disaster.
And the most common blunder for beginners is confusing the relationship between "interest rates" and "bond prices," these two seemingly contradictory entities.
In the common understanding, rising interest rates mean higher interest income, so shouldn't bond prices also rise sharply?
However, reality often delivers a double whammy.
The truth is quite the opposite: when interest rates rise, bond prices plummet like a slide.
The logic is simple: your bonds offer fixed interest, while bank deposit rates have skyrocketed. Who would even bother with your meager savings?
Thus, your bonds instantly go from being highly sought-after to unwanted. Without drastic price cuts, anyone who buys them is a fool.
This is the "seesaw effect" in the financial world.
Based on this ironclad rule, the prices of both government bonds and corporate bonds fluctuate wildly, constantly dictated by interest rates.
And the current situation is even more volatile!
The Federal Reserve has officially declared the end of the zero-interest-rate era, and the drumbeat of interest rate hikes is growing louder and more urgent.
This move by the US sends shivers down the spines of the world, with central banks around the globe following suit.
Add to that the mess caused by Brexit, and the market volatility is like a rollercoaster ride—without a seatbelt.
In Xia Country, the same trend followed. As soon as the whistle blew for interest rate hikes, the bond market instantly turned green, prices plummeting like diving champions.
"Mr. Su, I heard. You're buying up junk bonds from 'Jiangyang Shipbuilding' on a large scale?"
The speaker at the dinner was Du Yuanhang, the CEO of Fanghuan Shipping.
Since last week, he had been pestering Su Hao three times a day, practically begging him to have dinner with him.
Unable to refuse his earnestness, Su Hao finally made time for a private drink with him today.
Su Hao picked up a piece of food, swallowed slowly, and then spoke unhurriedly:
"Ah, yes. We have to thank our own shipping company for their incredible performance, thanks to General Manager Du's excellent leadership.
They've been incredibly efficient, like bulldozers in the industry, taking all the business from the shipping market and leaving their competitors struggling to make ends meet.
As a result, their bond prices have been absolutely disastrous, a complete collapse, practically free."
He spoke casually, but it was a stark reality.
Rising interest rates had already caused chaos in the bond market, and the shipping industry was even more severely affected, a VIP among the hardest hit.
Fanghuan Shipping, like a hungry wolf charging into a sheepfold, was frantically devouring market orders with the massive amounts of low-priced oil resources provided by Su Hao.
Coupled with the meteoric rise in international oil prices, almost all shipping companies in the industry were wiped out in one fell swoop; it wouldn't be an exaggeration to say the industry was littered with corpses.
In this apocalyptic situation, what fool would dare to buy shipping company bonds?
That wasn't just jumping into a fire pit, it was jumping straight into a volcano!
To anyone else, it was a suicidal act of madness.
But Su Hao didn't see it that way. His uncanny intuition, like a radar locking onto a target, firmly focused on those bonds considered worthless by others.
Du Yuanhang cautiously leaned forward and asked in a low voice:
"Excuse me, Mr. Su… at what price did you acquire them?"
"One-tenth of the original price," Su Hao uttered casually.
"...A 90% discount?!" Du Yuanhang's pupils dilated instantly, almost thinking he'd misheard. "You mean...a 10% discount?"
"No," Su Hao shook his head, correcting him, "I mean, bought it at one-tenth of its current value."
"?!?!?!?!"
Du Yuanhang's wine glass trembled, nearly spilling his drink, his face screaming "Holy crap!"
"No...no way?!" he stammered, "You slashed the price like this, and those banks still sold?!"
"They had no choice." Su Hao smiled.
"Those banks in Singapore are practically facing a bank run and bankruptcy. They're in dire straits; what choice do they have?
They're scared too. What if these companies file for bankruptcy protection?
The liquidation process could take three to five years, and their bonds would be worthless. When they'd get their money back was anyone's guess."
So, they had no choice but to cut their losses and survive!
At first, the banks tried to hold on, maintaining a facade of principle.
But the entire market was gripped by a pessimistic atmosphere, a "shipping industry is dead, time to burn paper money" mentality. There were simply no other buyers in the market, and panic spread completely.
Ultimately, the bankers were utterly desperate. Their psychological defenses crumbled, and they simply closed their eyes, steeled themselves, and frantically dumped their bonds like hot potatoes.
There was no other way; what they needed most right now was cash. Survival was the only priority.
"Brilliant! Absolutely brilliant!" Du Yuanhang slapped his thigh, his initial shock quickly turning into fervent admiration.
"President Su, your grand strategy, your magnificent blueprint, is almost complete, isn't it?"
"...Blueprint?" Su Hao paused, taken aback.
"Hehe, Mr. Su, don't try to hide it from me." Du Yuanhang revealed a knowing, sly smile.
"I, Du Yuanhang, may be slow-witted, but my judgment is sharp!
This isn't just a simple bottom-fishing spree of bonds; you're playing a long game!
By acquiring these bonds, you're lowering the target company's debt costs to a minimum, and then…
Hehe, you can logically swallow the entire company, right?"
Su Hao's heart skipped a beat upon hearing this.
To be honest, at first, his intuition was screaming alarm bells, telling him he had to buy these bonds.
He himself was puzzled as to why his intuition was reacting so strongly to these worthless bonds?
And bonds from companies on the verge of bankruptcy at that.
He himself was completely baffled.
Until this moment, Du Yuanhang's imaginative interpretation delivered the answer squarely to his face!
His mind went blank for a moment, as if a bolt of lightning had cleaved through the fog!