Credit Suisse and Nomura warn of losses after Archegos fails to meet margin calls

April 1, 2021

Here is the link. 

#Archegos​ #Nomura​ # Yahoo Finance's Julie Hyman and Steve Sosnick, Interactive Brokers chief market strategist, joins Yahoo Finance to discuss the market impact of Archegos defaulting on margin calls. Hedge fund blowup sends shockwaves through Wall Street and the City Oscar Williams-Grut·Senior City Correspondent, Yahoo Finance UK A little known hedge fund that blew up last week has sent shockwaves through the world of investment banking. Shares in Credit Suisse (CSGN.SW) and Nomura (8604.T) sunk over 10% on Monday after both warned they faced potentially billions in losses linked to hedge fund Archegos Capital. Banks that worked with Archegos and lent it money to buy shares were scrambling to offload Archegos' investments after a handful of risky bets made by the hedge fund went bad. The rush to exit these positions hit public shares prices, leaving banks with huge losses. Hedge funds typically borrow money from banks to invest, a process known as margin trading. This allows funds to leverage up the cash they hold and increase their positions — potentially earning far greater returns if their bets come good. However, it also means hedge funds can theoretically lose more money than they hold in client funds. If trades made on margin turn sour, banks will ask a client to put up more money as collateral to limit potential losses. This process is known as a margin call. Archegos faced margin calls on its positions last week but failed to provide extra cash. As a result, banks began selling off stocks held on the hedge fund's behalf — a fire sale known in the City as liquidating positions. The business press reported on Friday that Goldman Sachs (GS) and Morgan Stanley (MS) were selling huge chunks of shares in businesses including ViacomCBS (VIAC), Discovery (DISCA) and Chinese stocks Baidu (BIDU) and Tencent Music (TME). The block sales are estimated to be worth around $20bn (£14.5bn), according to the Financial Times. "Things started going wrong for Archegos when shares of companies such as Viacom started to slide mid-last week," said Michael Brown, a senior market analyst at Caxton Business. "It was at that point that margins were called, and couldn’t be provided, hence the block sales seen Friday." For more on this article please visit: https://uk.finance.yahoo.com/news/arc...