Here’s What Happened In This Wild Chinese Internet Stock Trading

Chinese stocks listed in the United States fell sharply last week, after several weeks in correction mode.

On Friday, a trader who took part in some of the wild trading in Chinese internet stocks confirmed that the main cause for the sale of Chinese stocks was that a fund, Archegos Capital Management, had been forced out of its positions.

Here is the sequence of events, according to the trader, who requested to remain anonymous:

1. The catalyst was ViacomCBS, which made a $ 3 billion stock offer through Morgan Stanley and JP Morgan earlier in the week that collapsed. This resulted in massive sales. This fund has long been a lot of Viacom using a lot of leverage.

2. Viacom’s dramatic drop in price has resulted in margin calls. Archegos has also long been many Chinese Internet names that have been traded in the United States.

3. Goldman Sachs, Morgan Stanley, Credit Suisse and Deutsche Bank have all forced Archegos to liquidate many Chinese Internet names through unregistered transactions, according to the trader. Late in the day on Friday, Goldman took over many names held by Archegos in its balance sheet and then liquidated by distributing them to clients.

4. Much of these transactions were difficult to see because many of the large transactions were done over the counter and not printed.

5. Reports earlier in the week that the Securities and Exchange Commission was starting to apply potential sanctions against Chinese stocks listed in the United States that did not cooperate with US regulatory authorities contributed to the surge of Chinese internets. midweek – but the main source of Friday’s chaos was the forced liquidation of much of Archegos, the trader said.