Goldman Sachs and Morgan Stanley have reportedly sold $19 billion worth of shares in Chinese tech and US media companies. Traders are now wondering what caused the unusually massive move and whether it will continue next week.
Goldman Sachs alone liquidated $10.5 billion worth of stocks in block trades on Friday, Bloomberg reported citing the investment bank’s email to clients.
The first batch, that included $6.6 billion worth of shares of Baidu, Tencent Music Entertainment Group and Vipshop Holdings, was sold before the market opened on Friday.
Later that day, the bank reportedly managed the sale of $3.9 billion worth of shares in American media conglomerates ViacomCBS and Discovery, as well some other companies, such as Farfetch, iQiyi and GSX Techedu.
The problems started last week when a disappointing stock sale by media giant ViacomCBS triggered devastating bank margin calls for shares to plummet 23% last Wednesday after the media company sold shares at a price that diluted its value.
Another US investment bank involved in the block trades, which are believed to have wiped $35 billion off affected firms’ valuations in just on Friday, was Morgan Stanley. The bank offered two batches of shares worth $4 billion each, according to the Financial Times.
The outlet also said that the move could indicate that a big hedge fund or family office faced some serious problems.
While block trades, when sellers are looking for buyers for large volumes of securities at a price sometimes negotiated privately between the two parties, are a common thing, the scale of Friday’s moves raised eyebrows.
Meanwhile, CNBC reported the selling pressure in some US media and Chinese stocks was linked to the forced liquidation of positions held by family investment office Archegos Capital Management. The lack of details about the move makes the situation worrisome.
The sudden liquidation of the New York-based billionaire Bill Hwang’s Archegos Capital Management ignited a fire sale of more than $20 billion in assets that has left some of the world’s biggest investment banks bearing billions of dollars of losses.
World banks may lose over $6 billion from the downfall of the US investment firm Archegos Capital, sources told Reuters. Regulators are closely monitoring the situation as panic spreads about the possible scale of the fallout.
RT. com / ABC Flash Point News 2021.