By Summer Zhen and Samuel Shen
Some Hong Kong / Shanghai Hedge Funds (Reuters) say they unload all or part of their action assets while the US President Donald Trump’s trade war eliminates billions of dollars of market value and forces them to reduce exchanges using money borrowed.
During the three days of negotiation following the announcement by Trump of large reciprocal prices on almost all countries, stock markets around the world have dropped, and the obligations have become both a paradise and a bet on rate drops by the federal reserve, turning the hypotheses of the head market before Trump takes up his duties.
The sale of Wall Street was vicious as investors who bet on the exceptionalism and the American economy could get out of its markets.
The S&P 500 reference index dropped by 10.5% over two days and lost around 5 billions of dollars in market value. The Chinese CSI300 Blue Chip index fell by more than 5% on Monday, while the Pan-European Stoxx index is down almost 12% compared to its March 3, ending and in correction territory.
William Xin, President of Hedge Fund, Spring Mountain Pu Jiang Investment Management, based in Shanghai, said that he had liquidated all of his stock positions as the current geopolitical landscape is disorderly and that the risk of global recession increases.
“The macro image becomes very chaotic, and I cannot see the future clearly,” said Xin, who sold his actions in China and Hong Kong last Thursday, before a public holiday published on Friday.
The hedge funds pursuing a short -term equity strategy have been particularly affected as market volatility increased, brokers said.
JPMorgan analysts estimated the net lever effect, which refers to the loan, by hedge funds, it dropped between 5% and 6% last week compared to the previous one, and this net lever effect of the hedge funds could be the lowest since the end of 2023.
The bank said on Friday that volatility targeting portfolios had between $ 25 and $ 30 billion in stocks for sale in the coming days because they are relaxing the risk. The funds negotiated on the stock market (ETF) had an additional $ 23 billion to sell to rebalance in Friday close, mainly technological shares, he said.
The Hedge Funds generally use margin accounts in which they borrow money from first -rate brokers towards the commercial markets.
When the value of the assets in the margin account of an investor falls below the required deposit of the broker, brokers can call on an investor to complete the cash account or sell these shares or bonds.
This rush to silver even saw gold, generally a safe asset during crises, fell strongly since the prices of Trump’s “Liberation Day” were released on April 2.
“In market sales like this, panic and forced sale via margin calls can dominate for a while,” said David Seif, chief economist of the developed markets at Nomura in New York.
“This does not mean that it is not based on a very real negative event, which is these prices. But I think that the sale that followed can take up its own life.”
Falling knives
Bob Zhang, Pine Street Capital Director Partner, a Beijing -based hedge fund, said that he had reduced the net exposure to Chinese shares to 25% by 100% in January. He also added hedges on the stock market index to protect himself against the risk of decline.
“Volatility in China could simply start, because the positions are very crowded, and some people try to catch a falling knife.”
Chinese investors are a little less likely to be affected by margin calls, because the market had increased much earlier this year, but the country is also the target of the largest Trump prices.
The Hong Kong Tech sub-index is down more than 27% in a month and back at the level at the start of the year.
China is facing new American prices over 50%, and it responded on Friday in kind by slapping additional samples from American imports.
“Too many uncertainties around, and everyone is disintegrating given the high volatility of the market,” said a portfolio manager in a large American multi-surgery fund, based in Hong Kong.
“I think we are just in the middle of this sale. This position generally relaxing will be sequentially affected from one designing fund to another.”
The finance of the margins in progress in China remains high, 1.9 Billion from Yuan (260 billion dollars) on April 3.
In South Korea, where a prohibition of sale uncovered for shares has been lifted this month, data from the Korea Financial Investment Association (Kofia) show that there was a total of Won (19.15 million dollars) of share sales between the 1st and 3 April, triggered by margin calls, against 11.5 billion 2023.
(1 $ = 1,462,3100 won)
($ 1 = 7,3077 Chinese Yuan Renminbi)
(Additional report by Isla Binnie in New York, Scott Murdoch in Sydney and Jihoon Lee in Seoul; writing by Vidya Ranganathan; edition by Jamie Freed)
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