[Fellow Investor Discusses Hot Topics] Bill Hwang’s 'Epic Margin Call' Event

Background of the Incident

On March 29, several banks, including Nomura and Credit Suisse, issued loss warnings, causing their stock prices to plummet. Nomura stated that due to a transaction by an American client, they might face significant losses. Nomura's statement about the 'American client' confirmed the rumors that shook Wall Street last Friday: 'Bill Hwang's margin call.' Archegos, the large fund managed by legendary capital tycoon Bill Hwang, faced forced liquidation of its heavily weighted stocks, triggering a 'chain reaction plunge' in other major holdings, including several Chinese concept stocks being severely battered. This margin call event set the 'record for the largest single-day loss in human history.'

Market Impact

Last Friday, several US-listed Chinese stocks experienced 'panic-driven' plunges due to the forced liquidation of Archegos Capital, a fund under Bill Hwang. Following three consecutive days of heavy losses for Chinese stocks, shares of iQIYI, Tencent Music, Vipshop, and GSX Techedu all dropped by more than 30%.

On Monday, most 'concept stocks' affected by the margin call continued their downward trend, with Vipshop falling another 8.72%, and GSX Techedu plunging 18.53%. Meanwhile, Nomura Holdings and Credit Suisse, impacted by this black swan event, plummeted over 10%, dragging down international banks collectively.

Before the market opened on Tuesday (as of 16:00), stocks slightly rose in pre-market trading due to the Archegos margin call. GSX Techedu (GSX.N) rose 2.4%, and Tencent Music (TME.N) increased by 0.8%.

Fellow Investors Discuss Hot Topics

Witnessing Bill Hwang's margin call that shook the global financial markets, and experiencing several consecutive days of an epic collapse in related Chinese stocks, fellow investors have been buzzing with discussions: Who is Bill Hwang? Why did Chinese stocks plummet? How are the banks holding up? What will happen if the incident continues to escalate? ...

Now, let’s have Hot Topic Girl take us through some of the insightful opinions from fellow investors!

@Shengcai Youshu Office：Remember this guy: Bill Hwang

This guy used to be a trader at Tiger Fund. Rumor has it he started with 200 million USD and consistently used high leverage in trading, growing his funds to 15 billion USD in 7 years. With additional leverage, he managed a fund worth hundreds of billions of USD. This margin call not only wiped out his principal as previously guessed by the media but also dragged down several financial institutions.

@老陈财经：Confirmed: A multi-billion-dollar margin call.

This guru reportedly had a personal fortune of up to 15 billion USD. This time, using multiple layers of leverage, his position reached nearly 120 billion USD. However, due to an unfavorable secondary offering plan by one of his holdings, ViacomCBS, its stock price plunged from 100 USD to 48 USD. Additionally, this guy was heavily invested in RLX Technology., as the country began to crack down on e-cigarettes, causing prices to drop from 20 yuan to 9 yuan and then get halved again; subsequently, the education sector cracked down on the online education industry, impacting heavily invested companies like GSX TecheduIt has now plummeted from 90 yuan to over 30 yuan.

@Jerome Chen：Goldman Sachs desperately dumped shares to escape losses, while Nomura and Credit Suisse suffered huge losses.

As a result, Nomura Securities expects its US subsidiary to suffer a massive loss of 2 billion USD. The reason appears to be linked to Friday's consecutive margin calls on Chinese stocks and US media stocks, with focus funds such as Tengyue and Archegos Capital, managed by Bill Hwang, holding accounts at Nomura. Credit Suisse also stated that this event would significantly impact Q1 earnings, although it is too early to quantify exact loss figures. Meanwhile, Goldman Sachs, another major backer of Bill Hwang, had already started dumping shares last Friday to avoid further damage.

@Barron's:Why do these margin-called funds hold concentrated positions in Chinese stocks?

First, the scale of these funds isn't particularly large. At its peak, Archegos reportedly held around 15 billion USD, starting from just a few hundred million USD. By early this year, it was said to be around 5 billion USD, reaching a maximum of 15 billion USD. Therefore, its actual size isn't very large. If it aims for high alpha and substantial growth, it can only adopt an extremely concentrated investment strategy, akin to gambling. Thus, it took on enormous leverage, borrowing vast amounts of capital. Reportedly, its gross exposure was as high as several hundred billion.

@亮眼看财经：Whether this will trigger a crisis in the US stock market can only be verified over time.

Bill Hwang, the hedge fund manager, might just be one of many in the US stock market frequently using high-leverage tools. As a legendary figure, he was able to easily move hundreds of billions of dollars. If there are hundreds or even thousands of Bill Hwangs in the market, the consequences could be unimaginable. Whether this gambler of the capital markets will eventually trigger a crisis in the US stock market can only be verified by time.

@丫丫港股圈：Nomura Securities: The main character of today's worst event.

According to the 2020 annual report, Nomura Holdings' total assets reached 44 trillion yen, with a net profit of 219.367 billion yen, equivalent to 20.03 billion US dollars.In other words, if the claims cannot be recovered, Nomura would really suffer a huge loss this time, equivalent to last year’s entire profit wiped out.

@Hao Investment:Gains and losses share the same origin.

Leverage played a decisive role in BILL’s rapid wealth growth; similarly, leverage also caused his massive losses this time. Even professional investment institutions find it difficult to control leverage—let alone ordinary people. Leverage can be addictive, and everyone should treat it with caution.

Points to watch for the future

1. Other financial institutions significantly affected by the Archegos blow-up event;

2. Investigation by Washington into the blow-up event.

Whether it will trigger large-scale deleveraging among hedge funds.

Note: The above insightful perspectives were selected based on comprehensive consideration of content page views and interaction volume. Fellow investors whose comments were selected will receive a “Featured Hot Comment” reward of 188 points. We welcome more fellow investors to follow community hot topics, participate, and share your insightful perspectives!

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