Archegos-Linked Stocks Advance as Fallout Fears Ease
(Bloomberg) -- The stocks at the center of the Archegos Capital Management crisis posted gains Tuesday as fallout from the fund’s liquidation appeared to be contained and no additional block trades were reported.
ViacomCBS Inc. rose 3.6% in New York following its weeklong plunge, with Discovery Inc. and Tencent Music Entertainment Group both climbing more than 4%. The American depositary receipts of Chinese companies also gained, with GSX Techedu Inc. boosted by a planned stock purchase by its chief executive officer, and Vipshop Holdings Ltd. helped by a $500 million buyback proposal.
Shares in the companies, which also include Baidu Inc., Farfetch Ltd. and Iqiyi Inc., have had a rocky couple of sessions following the forced liquidation of positions linked to Bill Hwang’s Archegos, with ViacomCBS down 55% in the five trading days through Monday. While investors remain nervous about the potential for more liquidations, there have been no signs yet of a broader contagion. The S&P 500 Index slipped about 0.3%.
“Market participants will be glad to see this has so far been contained -- though there may be some more trades related to Archegos that need unwinding,” Neil Wilson, chief market analyst at Markets.com, said by email. “Banks left holding the bag -- which look to be Nomura and Credit Suisse more than others -- will suffer significant losses.”
Banks roiled by the Archegos Capital fallout may see total losses in the range of $5 billion to $10 billion, according to JPMorgan. Losses from trades unwinding will be “very material” in relation to lending exposure for a business that is mark-to-market and holds liquid collateral, analysts led by Kian Abouhossein wrote in a note.
Shares in Credit Suisse and Nomura both extended Monday’s steep declines, with the lenders having warned of potential “significant” losses after an unnamed U.S. hedge-fund client defaulted on margin calls. The Swiss bank expects its loss tied to the implosion of Archegos Capital Management to run into the billions, according to people with knowledge of the matter. Credit Suisse fell about 3% in Zurich trading, taking its decline for the week to 16%. Nomura shed a further 0.7% in Tokyo, following Monday’s 16% slump.
Stocks valued at $2.64 billion changed hands in a flurry of block trades Monday. Five of them valued at a combined $2.14 billion were executed by Wells Fargo & Co., according to a person familiar with the matter. Separately, about 20 million shares of Rocket Cos. were sold through Morgan Stanley, people familiar with the matter said.
Archegos broke its silence on the matter late Monday.
“This is a challenging time for the family office of Archegos Capital Management, our partners and employees,” Karen Kessler, a spokesperson for the firm, said in an emailed statement. “All plans are being discussed as Mr. Hwang and the team determine the best path forward.”
Kessler works at Evergreen Partners, which specializes in crisis communications and reputation management, according to its website.
The U.S. Securities and Exchange Commission has been monitoring the forced liquidation in holdings linked to Archegos, a spokesperson said.
©2021 Bloomberg L.P.