In recent days, the financial markets have been hit by the Archegos Capital Management case, the US hedge fund of raider Bill Hwang, current founder and co-CEO and former founder of Tiger Asia in Hong Kong.
Last Friday, the American hedge fund had to, driven by its creditor banks, close its positions by liquidating a total of about 20 billion dollars of shares and facing insolvency. The fund has billions of dollars of stocks in many companies and as a result the event had a domino effect on some credit institutions such as Nomura and Credit Suisse.
Nomura Holdings Inc, the Japanese banking giant and Credit Suisse Group, a leader in financial services, are among the companies that are recording big losses for having made loans to the hedge fund in question. Yesterday, in an official note, the Japanese group announced that “on March 26, 2021, an event occurred that could subject one of its US subsidiaries to a significant loss arising from transactions with a US client. Nomura is currently evaluating the extent of the possible loss and the impact it could have on its consolidated financial results. The estimated amount of the claim against the client is approximately $2 billion based on market prices as of March 26. This estimate is subject to change depending on unwinding of the transactions and fluctuations in market prices. Nomura will continue to take the appropriate steps to address this issue and make a further disclosure once the impact of the potential loss has been determined”.
“A significant US-based hedge fund – Credit Suisse Group declared in an official note – defaulted on margin calls made last week by Credit Suisse and certain other banks. Following the failure of the fund to meet these margin commitments, Credit Suisse and a number of other banks are in the process of exiting these positions”. The Group then concluded by adding that: “While at this time it is premature to quantify the exact size of the loss resulting from this exit, it could be highly significant and material to our first quarter results, notwithstanding the positive trends announced in our trading statement earlier this month. We intend to provide an update on this matter in due course”.
The recent case of the American hedge fund Archegos Capital Management had serious effects on the financial market and in fact Nomura lost almost 17% on the Japanese stock market, while Credit Suisse shares were down 14%.