US sharemarkets were rocked Friday by shock selling of a series of billion-dollar blocks of shares in selected US media companies and the depository receipts of Chinese internet giants that left massive losses on the day and over the week.
According to media reports over the weekend the block sales were not signalled to the market (as they would normally have been) and involved selling by Goldman Sachs and Morgan Stanley with a reported value on Friday of more than $US18 billion.
Bloomberg reported block sales in excess of $US10 billion were made by Goldman Sachs alone without warning or a public statement.
The Financial Times reported that Goldman Sachs had told counterparties that the sales were prompted by a “forced deleveraging”.
- CNBC said some of the selling “was due to the forced liquidation of positions held by Archegos Capital, which was founded by the former Tiger Management equity analyst, Bill Hwang.
- The selling saw shares in ViacomCBS and Discovery close down more than 27% on Friday, with Viacom off more than 50% for the week while Discovery slid 45%.
- The sales saw the market value of stocks like ViacomCBS and Discovery fall by around $US35 billion over the week – for no apparent reason apart from a couple of analyst downgrades after both companies had seen their shares rise strongly in the preceding weeks.
The selling more than reversed big gains both companies (60% for Viacom CBS for example) made up to the start of last week with analysts enthusiastic about both companies’ move into streaming video.
Shares in Viacom and Discovery had been heavily shorted amid investor scepticism about their long-term prospects in a crowded streaming video landscape.
Some analysts say the reports by Bloomberg and FT seem to suggest that a big holder of shares in Viacom and Discovery (and at least two others) were forced to sell for financing reasons. The holder either couldn’t settle transactions due to the recent rise in prices or had been caught on the wrong side of a short squeeze play.
Bloomberg News reported Goldman Sachs sold $US6.6 billion worth of shares of Baidu Inc, Tencent Music Entertainment Group and Vipshop Holdings Ltd, before Wall Street opened on Friday.
It then sold $US3.9 billion worth of shares in ViacomCBS Inc, Discovery Inc, Farfetch Ltd, iQIYI Inc and GSX Techedu Inc, according to the report.
Reuters reported that most of the unregistered stock offerings were managed by Morgan Stanley, on behalf of one or more undisclosed shareholders, the report added, citing people familiar with the matter.
The FT reported that Morgan Stanley sold $US4 billion worth of shares earlier in the day, followed by another $US4 billion in the afternoon.
- At the same time shares in Chinese net giants fell heavily – Baidu was down more than 18%, Tencent more than 33% and Vipshop more than 31%.
- Those falls seem to be a reflection of steep falls in Hong Kong in recent weeks as the Chinese governments tries to bring these giants under more control, especially in financial services.
- CNBC says big falls in the value of the Hong Kong listed shares of the selected Chinese giants reached $US60 billion by Friday.
- The US is cracking down on the lax accounting of many of these Chinese companies which in turn has seen an increasing number drop their uS listing and move to Hong Kong. But there is no protection in Hong Kong as Beijing’s crackdown on these internet giants continues
On Wednesday, the US Securities and Exchange Commission (SEC) adopted a law that threatens to remove companies from the U.S. stock exchanges unless they comply with American auditing standards.
Known as the Holding Foreign Companies Accountable Act, the law was passed by the administration of former Trump Administration.
Firms identified by the SEC will require auditing by a US watchdog and need to show that they are not owned or controlled by a government entity in a foreign jurisdiction.
Companies will also have to name any board members who are Chinese Communist Party officials, the SEC said in a Wednesday statement.
That will see a direct clash between the US and china if Beijing brings these companies under more direct controls and appoints its stooges to their boards.
