Banking investment titans, Nomura (T: 8604) and Credit Suisse (ETR: CSX), said they are facing billions of dollars in losses after US hedge fund Archegos Capital defaulted on margin calls.
Fundamental analysis: Banks expect significant losses after a share collapse in a U.S. hedge fundNomura and Credit Suisse said Monday they were facing substantial losses after a hedge fund known as Archegos Capital has reportedly defaulted on margin calls. After a selling frenzy on Friday, shares of companies linked to Archegos plummeted, according to Reuters.
Japanese financial services company Nomura said on Monday that it is facing a potential $2 billion loss due to its transactions with Archegos, while Credit Suisse warned that the hedge fund’s default on margin calls could substantially hurt its first-quarter earnings.
The Swiss bank said that itself and other banks will exit these positions linked to Archegos, following the default.
Nasdaq 100 futures and S&P 500 Futures also lost 0.5% in early trading after the news about the fallout spread. Moreover, investors said they were concerned about whether the fallout is complete or more selling could be expected.
Swiss financial watchdog said Monday it was informed about the situation and that it was in contact with Credit Suisse about the matter. The regulator also said a number of other banks were involved.
Elsewhere, Japan’s Chief Cabinet Secretary Katsunobu Kato said the government would keep a close eye on the situation with Nomura and that the Financial Services Agency would exchange information with the central bank.
Technical analysis: Banks hit hardShares of Nomura plunged 16.3% while Credit Suisse stock price is trading about 14% lower in Europe today. Other banks’ shares dropped as well, with Deutsche Bank losing 5% and UBS falling 3.8%.
Nomura weekly chart (TradingView) Nomura stock price fell over 16% to unwind all gains it made over the past 8 weeks. On Friday, shares of Nomura printed new 3-year record highs before plunging today to approach the near-term support zone around 575.
Credit Suisse weekly chart (TradingView) Credit Suisse stock price hit the 2021 low at 10.65 early this morning to move below the 100-WMA at 11.08. The price action is likely to be focused on this level with a close below opening the door for more losses.
SummaryFinancial services companies Nomura and Credit Suisse said they were expecting significant losses after a U.S. hedge fund the banks were linked to has defaulted on margin calls.
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