The hedge fund breaks off and affects global banks

Sources revealed that the selling pressure on U.S. stocks triggered by the severed head of U.S. hedge fund operator Archegos Capital Management may lead to losses of more than $6 billion (about NT$171.4 billion) for global bankers, reflecting the hidden concern of investors’ excessive risk chasing. The U.S. Securities and Exchange Commission (SEC) and other regulatory bodies on the 29th also asked Wall Street big banks to brief the situation.

Bloomberg information reported that Japan’s leading banking industry Mitsubishi UFJ Financial Group warned that it may lose $300 million because of the settlement of transactions related to the Archegos site. This comes on the heels of warnings from Nomura Holdings and Credit Suisse that they will face significant losses due to a U.S. client’s failure to collect on margin.

Former Tiger Asia fund manager Bill Hwang (Bill Hwang, pronounced), a former U.S. fund manager, said the company would not be able to pay its debts. Bill Hwang’s Archegos failed to meet margin calls, prompting brokerage banks to sell Archegos’ assets, causing ViacomCBS, Discovery, Baidu ADR and other stocks to suffer a $20 billion “block trade” on the 26th. ” (block trade) selling pressure, selling pressure continues to 29, there are 2.64 billion U.S. dollars of stocks through the “huge trade” off.

Reuters cited sources pointed out that the global banking industry may lose $ 6 billion, Credit Suisse expects to lose at least $ 1 billion, or even up to $ 4 billion. The Wall Street Journal and CNBC pointed out that Goldman Sachs and Morgan Stanley quickly sold most of the assets held by Archegos last week to avoid suffering huge losses because of the quick decision.

Archegos broke its silence on the 29th, issuing a statement saying that it was “discussing various plans”. According to the Financial Times and Bloomberg information and other media, Archegos had last week with major brokers to discuss how to deal with related matters in an orderly manner to reduce the impact on the overall market, but in the end there is no conclusion, the banks are still on their own, triggering the market selling pressure.

The incident has also raised questions about the regulator’s ability to accumulate tens of billions of dollars in equity bets through derivative instruments such as swap contracts, without having to disclose their holdings to other brokers, and even Archegos’ total holdings are still a mystery. Archegos uses derivative transactions with bankers to gain exposure to companies without actually buying the stock, and it also finances itself with brokers, reducing the actual amount of capital invested and increasing leverage.

Bloomberg information reported that the U.S. Securities and Exchange Commission and the Financial Institutions Regulatory Authority (FIRA) 29 called an emergency meeting of the big Wall Street banks to understand the causes behind this wave of “mega-trade” selling pressure, officials also asked about the impact of operations, potential credit risk and other threats.

Experts pointed out that this incident also reflects the stock market rally, investors chasing excessive risk of hidden worries. The latest survey by the American Retail Investors Association shows that nearly 51% of retail investors believe that the stock market will continue to rise in the short term, a rate much higher than the historical average of 38%.