In the most basic hedging operation, the fund manager buys a put option with a certain price and term after buying a stock. The utility of put option is that when the stock price falls below the option-limited price, the holder of seller option can sell his stock at the option-limited price, thus hedging the risk of stock decline. In another hedging operation, the fund manager first chooses a bullish industry, buys several high-quality stocks in this industry, and sells several inferior stocks in this industry according to a certain proportion. The result of this combination is that if the industry is expected to perform well, the increase of high-quality stocks will exceed other stocks in the same industry, and the gain from buying high-quality stocks will be greater than the loss from shorting inferior stocks; If the expectation is wrong, the stocks of this industry will fall instead of rising, then the decline of the stocks of poor companies will be greater than that of high-quality stocks, and the profit of short selling will be higher than the loss caused by the decline of buying high-quality stocks. Because of this mode of operation, the early hedge fund can be said to be a form of fund management based on the conservative investment strategy of hedging.
After decades of evolution, hedge funds have lost the original connotation of risk hedging, and hedge funds have become synonymous with a new investment model. That is, based on the latest investment theory and complex financial market operation skills, we should make full use of the leverage of various financial derivatives to undertake high-risk and high-yield investment models.
2. Possible impact of hedge funds on China.
China is the largest market that international hedge funds rarely set foot in. At present, China has become one of the "twin engines" of the world economy, but its financial market is not perfect and it is in an important period of system transformation. Since the reform of RMB exchange rate mechanism, the cumulative appreciation rate has reached about 6%, but it is far from enough to calm the strong expectation of further appreciation of RMB. These factors are undoubtedly a great temptation for hedge funds. Although China still implements strict capital account control, hedge funds have long been dissatisfied with making indirect profits through the surrounding markets. In QFII, foreign direct investment and trade projects, the figure of hedge funds began to emerge; Some trade contracts and direct investment have also become their protective colors. "Gray" hedge funds have begun to try to enter China. Although they don't have the conditions to make waves in China for the time being, they can still exert an important influence on China's economy and finance through different channels.
RMB exchange rate
With the steady progress of the exchange rate system reform, the RMB has shown a strong appreciation trend, which undoubtedly provides endless imagination for hedge funds. However, there are still obstacles to concocting a financial storm in China: capital account control, managed fluctuation of RMB exchange rate and lack of RMB derivatives, which make hedge funds lack the necessary profit channels and tools. Therefore, it is still difficult for hedge funds to enter the mainland to directly speculate in RMB. At present, they can only benefit indirectly through the RMB "non-deliverable forward" (NDF) market.
Since 2003, the scale of RMB NDF market in China, Hongkong and Singapore has developed rapidly, and the transaction amount has risen rapidly, which implies the desire of hedge funds to bet on RMB to some extent. In August 2006, Chicago Mercantile Exchange also launched three pairs of NDF derivatives, namely RMB futures and options against the US dollar, euro and yen, which made the linkage between NDF and domestic RMB exchange rate stronger and even forced the reform process of domestic financial market.
In any case, the opening of capital account is an unavoidable topic in the future. On this rumbling wheel, the financial sector, which has always been the most protected, is bound to be baptized by the international storm, and the obstacles faced by hedge funds will be lifted one by one. However, with the lessons of the Southeast Asian financial crisis, China is cautious about exchange rate stability and financial security, and it may not be easy to attack China's exchange rate system on a large scale.
stock market
The domestic A-share market may be more attractive to hedge funds than Hong Kong stocks, because the China stock market is relatively immature, which is welcome for hedge funds who are good at exploring market gaps. At present, in addition to RMB exchange, there are other obstacles for hedge funds to directly enter the mainland stock market: QFII qualification needs strict examination, and the investment scale is limited; It is not allowed to set up a wholly foreign-owned fund management company, and the establishment and operation of a joint venture company must strictly abide by the relevant laws and regulations of our country and fulfill the obligation of information disclosure. The domestic stock market has not yet established a short-selling mechanism, that is, there is no hedging tool.
However, these difficulties are not enough to stop hedge funds from chasing profits. Many institutional investors have hierarchical affiliation behind them, which is vividly called "tractor" account. Some hedge funds only participate in the stock market in their own names. In the recent rising stock market, hedge funds can get considerable returns only by relying on superb investment skills and high leverage coefficient, even without hedging. Moreover, on September 8, 2006, China Financial Futures Exchange, the first financial derivatives exchange in China, was officially listed, marking a new leap from commodity futures to financial futures in China. It is only a matter of time before the Shanghai and Shenzhen 300 index futures are launched, which only provides further convenience for hedging operations.
The non-convertibility of RMB and QFII quota are the biggest obstacles for hedge funds to enter the mainland stock market at present. Once the capital account is completely liberalized, hedge funds have smooth access channels, and the maturity and standardization of the stock market are more vulnerable to impact.
Real estate market
Under the dual effects of current high housing prices and the expectation of RMB appreciation, the attraction of entering the real estate market for hedge funds is enormous. In recent years, China's real estate market has continued to operate at a high level, and some prices have already included false high components, but it is the "real money" bank loans that support the prosperity of the real estate market. Because the real estate market is inextricably linked with the financial system, once it is maliciously attacked by hedge funds, the collapse of the real estate market will inevitably lead to an earthquake in the entire financial system.
The government knows the importance of promoting the healthy development of the real estate industry. Since 2003, many macro-control measures have been introduced one after another. Although the regulation effect is not satisfactory, it reflects the good will and firm determination of the authorities. Compared with financial assets such as stocks, the poor liquidity of real estate and strict control measures will increase the transaction costs and policy risks of hedge funds.
Explore the regulatory measures of hedge funds
The existence and development of hedge funds is the inevitable and concentrated expression of the profit-seeking nature of capital, which is of positive significance to the development of financial markets. First of all, hedge fund is essentially an investment means to pursue high returns under controllable risks, and its rational use is conducive to enhancing investors' ability to resist risks; Secondly, the arbitrage activities of hedge funds are based on the discovery and identification of "market failure". Under its activities, the spread will gradually disappear, which will help the market find the reasonable price of factors and make the market tend to be balanced; Thirdly, hedge funds can strengthen the connection between domestic financial markets and international financial markets and promote the maturity and development of the financial system. Therefore, hedge funds should not be unilaterally understood as a scourge, but should be actively studied and guided to foster strengths and avoid weaknesses. At the same time, China must pay full attention to the problem that hedge funds disturb the normal order of the market, take practical and effective measures, explore effective supervision methods of hedge funds, and safeguard the security of China's economy and financial market.
First, resolutely implement the idea of opening up the capital market step by step, grasp the rhythm and advance in an orderly manner. Through orderly opening up, it has won valuable time for the improvement of China's economic and financial system, talent training and experience accumulation. In the process of gradual opening up, it is necessary to avoid a large inflow and outflow of international capital, which will lead to large fluctuations in the exchange rate and hinder financial security.
Second, promote the openness of hedge fund establishment. After the capital market is fully opened, it is impossible to shut out hedge funds blindly. It is better to make it public than to let it enter through various "gray" channels. For example, the management fee accrual method can distinguish between hedge funds and the same fund, and the affiliation of funds can be put on record to provide some convenience for operation, so as to urge and encourage hedge funds to register.
Third, set up special laws and regulations to guide the behavior of hedge funds, make the management of hedge funds have laws to follow, and standardize the operation of hedge funds. Treat low-risk stable hedge funds and high-risk speculative hedge funds differently and supervise them in different categories. Establish a monitoring system for large-scale capital flows. Grasp the changes of large amount of funds as soon as possible, and comprehensively monitor weak markets such as stock market and foreign exchange market. Require hedge funds to strengthen information disclosure and increase transparency.
Fourth, limit the financial leverage ratio of hedge funds. When it is difficult to directly control the behavior of hedge funds, strictly controlling the lending of financial institutions to hedge funds is an effective indirect means. Banks and other financial institutions should carefully consider market risks, strictly examine loans and strictly control the quantity and quality of mortgaged assets. After all, hedge funds have limited capital. Without the support of leverage, they will lose their ability to make waves in the financial market, and also avoid financial institutions becoming the ultimate undertakers of hedge fund risks.
Fifth, strengthen international cooperation, exchange information and experience, strengthen international supervision and coordination of offshore capital operation, and maintain the stability of the world capital market.
The method is to use a lever.