Forced Liquidation Of Hedge Fund Positions Causes Market Volatility

Much of the selling in U.S. media and Chinese technology stocks last week was due to the forced liquidation of positions held by hedge fund Archegos Capital Management.

Media stocks ViacomCBS (NASDAQ:VIAC) and Discovery (NASDAQ:DISCA), which have seen massive gains this year, came under heavy selling pressure last week and were said to be at least two of the stocks in question, along with Chinese technology stocks Baidu (NASDAQ:BIDU), Nio (NYSE:NIO), Tencent (NYSE:TME), Vipshop (NYSE:VIPS) and others.

ViacomCBS and Discovery closed down more than 27% on Friday, with Viacom off more than 50% for the week while Discovery fell 45%. The companies have been heavily shorted amid investor skepticism about their long-term prospects in a shifting media landscape.

Baidu was down more than 18%, Tencent more than 33% and Vipshop more than 31% last week. Archegos Capital’s forced sales were related to margin calls due to heavily leveraged positions, according to multiple media reports.

Archegos Capital was founded by the former Tiger Management equity analyst, Bill Hwang.
Teng Yue Partners, an Asia-focused fund run by another former Tiger Management analyst, Tao Li, was negatively impacted by drawdowns last week in several of its key holdings as well.