In one fell swoop, the Archegos banks discussed Co-operation to head off selling frenzy, it sold shares valued at $20 billion- causing unrest in the financial world.
Investors around the world are watching the start of trading on the stock exchanges at the start of the week after an extraordinary wave of block trades worth $20 billion on Friday startled many investors.
Bill Hwang’s Archegos Capital Management hedge fund, as reported by two people who are directly familiar with the company’s business, is behind the multi-billion dollar trades in which stocks of Chinese tech giants and US media conglomerates were sold.
While some of the stocks that were part of the block trades carried out by Goldman Sachs and Morgan Stanley had rallied shortly before the market closed on Friday, the action left its mark on Viacom CBS and Discovery; both recorded their biggest daily losses to date.
On Friday, Morgan Stanley had sold shares for around $13 billion, including Farfetch, Discovery, Baidu and GSX Techedu. Goldman Sachs sold $6.6 billion in shares in Baidu, Tencent, and Vipshop- and then sold another $3.9 billion package of Viacom CBS and Iqiyi. That comes from an email to clients that Bloomberg was able to see.
Morgan Stanley bought a large package of Viacom CBS stock on Sunday, according to one familiar with the matter. About 45 million shares have been offered on behalf of an unnamed investor, the person said.
Sharif Farha, a Dubai-based portfolio manager at Safehouse Global Consumer Fund, expects Viacom CBS and Discovery will actually recover on Monday, noting that the market’s fundamental metrics are intact.
Farha expects harmless price action to start the week, but expectations for the market opening remain high. “Investors know what happened and will be glued to the screens,” he said.
Meanwhile, tech share prices in Hong Kong fell on Monday, with the Hang Seng Tech Index – which includes many Chinese companies- losing up to 2.7 percent. Baidu slipped up to 5.1 percent.
Citigroup analysts said, however, that the massive sell-off of US-listed shares in Chinese tech companies is not related to their business data- and thus increases the chances of buying.
In addition to the shares sold, the block trades are already drawing wider circles: In Japan, the financial services provider Nomura Holdings crashed by a record value after it became known that its US business had a “significant” potential loss.
The Nikkei 225, on the other hand, rose 0.7 percent. June contracts on the S&P 500 had fallen 0.6 percent at 3:34 p.m. (local time) in Tokyo. The futures on the Nasdaq 100 fell 0.8 percent.
Swiss investment bank Credit Suisse also announced on Monday that it may suffer a significant loss in the first quarter related to an unnamed U.S. hedge fund client who is failing to meet margin demands.
The Zurich-based bank said it was too early to quantify the exact amount of the loss. At the same time, Monday’s statement said the loss “could be very significant and material to our first quarter earnings.”