Investment banks Nomura Holdings of Japan and Credit Suisse of Switzerland have said they will be big losers from a fire sale of almost £15billion’s worth of stocks. The sell-off could have a huge impact on global markets, with Credit Suisse already seeing its shares plunge by 14 percent while in Nomura shares dropped more than 16 percent. Nomura said in a statement: “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 $2billion (£1.45billion) based on market prices as of March 26.”
Credit Suisse said: “A significant US-based hedge fund 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 Swiss bank also warned: “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.”
Other European banking stocks also fell in early trading on Monday, with Deutsche Bank falling five percent and UBS down 3.8 percent.
This has left investors on edge, waiting to see if the fallout from the sell-off in New York will spread further.
Archegos Capital, a New-York-based firm that manages the private wealth of the hedge fund manager Bill Hwang, was widely reported to be the client linked to the widespread losses.
As the global markets brace for impact, an expert told Sky News today that while in the short term the picture will continue to look bleak, the fire sale could spark a lucrative buying opportunity.
Patrick Spencer, Baird’s Vice Chair of Equities, said: “The actual numbers involved, we are talking about $20billion (£1.45billion) rather than hundreds of billions.
“You’ve got to remember that a lot of these investment banks are quite smart, they do basically collateralise their losses, so they offload them.
Neil Wilson, chief market analyst at Markets.com, referred to the recent Gamestop furore as he outlined the increasingly unusual trading activity happening in the world’s markets.
He said: “Archegos was massively levered and it appears to have been too concentrated in a number of risky stocks – but when we look at this and think about the GameStop saga and the decline in Tesla as two examples – what we’re seeing are more and more pockets of very unusual trading activity in some stocks.”
Between December and late January shares in the troubled video games retailer had shot up 1,700 percent as a group of Reddit investors dealt big losses to Wall Street hedge funds.
The hedge funds had bet against the company, meaning GameStop’s surge sparked big losses.