Fears of new wave amid block-trade sell-off

Last week's block-trade spree in the United States has left investors pondering just how unprecedented the sell-off was - and whether there's more to come.

On Friday, Goldman Sachs liquidated US$10.5 billion (HK$81.9 billion) worth of stocks in block trades, part of an extraordinary spree of selling that erased US$35 billion from the values of bellwether stocks ranging from Chinese technology giants to US media conglomerates.

The Wall Street bank sold US$6.6 billion worth of shares of Baidu (9888), Tencent Music Entertainment and Vipshop before the market opened in the United States, according to an email to clients seen by Bloomberg News.

That move was followed by the sale of US$3.9 billion of shares in ViacomCBS, Discovery, Farfetch, iQIYI, and GSX Techedu, the email said.

Shares in ViacomCBS and Discovery tumbled around 27 percent each on Friday, while Baidu and Tencent Music plunged during the week, dropping as much as 33.5 percent and 48.5 percent, respectively, from Tuesday's closing levels.

CNBC reported that the selling pressure was due to liquidation of positions by family office Archegos Capital Management, citing unnamed sources.

Archegos was founded by Bill Hwang Sung-kook, who founded and ran Tiger Asia, a Hong Kong-based hedge fund. In 2013, Hong Kong court ordered Tiger Asia, Hwang and head trader Raymond Park to pay HK$45 million to around 1,800 investors who were affected by the fund's insider trading in China Construction Bank (0939) and Bank of China (3988) in 2008 and 2009.

Block trades - the sale of a large chunk of stock at a price sometimes negotiated outside of the market - are common, but the size of these trades and the multiple blocks hitting the market during the normal trading hours aren't.

"This was highly unusual," said Oliver Pursche, a senior vice president at Wealthspire Advisors, which manages US$12 billion in assets. "The question now is: Are they done? Is this over? Or come Monday and Tuesday, are markets going to be hit by another wave of block trades?"

The situation is worrisome "because we don't have all the answers on whether this was the liquidation of just one fund or more than a fund, or whether it was a fund liquidation to begin with and the reason behind it," Pursche said.

"It can be difficult for a manager from a positioning standpoint. Another wave of block trades may force fund managers to reassess their commitment to some stocks," he said.

More of the unregistered stock offerings were said to be managed by Morgan Stanley, according to people familiar with the matter, on behalf of one or more undisclosed shareholders. Some of the trades exceeded US$1 billion in individual companies, calculations based on Bloomberg data show.