Big Block Trades Linked To Archegos Raise Trading Concerns This Week

(Reuters) – A number of big block deals on Friday that investors said caused sharp declines in the shares of a handful of companies were linked to an investment fund, Archegos Capital, a source close to the situation. volatile trading in the coming days.

Shares of ViacomCBS and Discovery fell around 27% each on Friday, while US-listed shares of China-based Baidu and Tencent Music plunged during the week, falling 33.5% respectively. and 48.5% from Tuesday’s closing levels.

Investors and analysts on Friday cited blocks of Viacom and Discovery shares put on the market as likely exacerbating the decline in those shares. Viacom was also downgraded by Wells Fargo on Friday.

The block deals were linked to sales of stakes by Archegos, a source familiar with the situation said, confirming reports elsewhere. CNBC reported on Saturday that the selling pressure was due to the liquidation of positions by family office Archegos Capital Management, citing a source with first-hand knowledge of the situation, and the Financial Times and Bloomberg reported the link earlier on Sunday. The link with Archegos was also reported earlier by IPO.

A person from Archegos who answered the phone on Saturday declined to comment. Archegos was founded by Bill Hwang, who founded and ran Tiger Asia, according to a page capture here from the fund’s website. Tiger Asia was a Hong Kong-based fund of funds that sought to profit from betting on securities in Asia.

Some market participants said last week’s wild moves are likely to make investors increasingly cautious.

“This is insane,” said Edward Moya, senior market analyst at OANDA. “When you consider how some of these businesses have exploded over the past few months, there will be concerns that we are over-leveraged.”

Other market participants have said that potential outcomes will only have a limited impact in larger markets. The Nasdaq Composite and the S&P 500 both jumped more than 1% on Friday despite massive selling from Viacom and other stocks.

“These stories of liquidation do happen from time to time,” said Michael Antonelli, market strategist at Baird. “Some of the names that big blocks traded on Friday may experience some near-term volatility as traders question whether the sell is over.”

Mike O’Rourke, chief market strategist at JonesTrading, said he expected the trades to be “largely done.”

“The major brokers have made a lot of noise in the marketing of these blocks,” O’Rourke said. “They took stocks down aggressively in order to make the trades.”

O’Rourke added that blue chip brokers usually buy the leftover position, and he expected most of the names involved in block trades to “deviate much higher” in the trade before the marketing.

INVOLVED BANKS

A number of banks participated in the block sales. A source familiar with the matter said on Saturday that Goldman Sachs Group Inc was involved in the large block trades. The Financial Times reported that Morgan Stanley sold $ 4 billion in shares early Friday, followed by an additional $ 4 billion in the afternoon.

A source familiar with the matter said Deutsche Bank was also involved in the block transactions.

Bloomberg and the Financial Times reported on Saturday that Goldman had liquidated more than $ 10 billion in shares in block deals.

An email to customers seen by Bloomberg News said Goldman sold $ 6.6 billion in shares of Baidu Inc, Tencent Music Entertainment Group and Vipshop Holdings Ltd, before the US market opened on Friday, according to the Bloomberg report on Saturday.

Subsequently, Goldman sold $ 3.9 billion in shares of ViacomCBS Inc, Discovery Inc, Farfetch Ltd, iQIYI Inc and GSX Techedu Inc, according to the report.