Allianz's Mohamed El-Erian on what Friday’s margin call means for the broader market
Shares of ViacomCBS and Discovery both rebounded after coming under intense selling pressure last week. The two companies were believed to be hit by forced liquidation of positions held by the multibillion dollar family office Archegos Capital Management, a source familiar with the situation told CNBC. Mohamed El-Erian, economic advisor at Allianz and Gramercy and president at Queens College, Cambridge, joined “Squawk Box” on Monday to discuss what he thinks the move means for the broader market. To see more of the interview with El-Erian sign up for a free trial to CNBC Pro: https://cnb.cx/3m2D96r
Some of the severe selling pressure in select U.S. media stocks and Chinese internet ADRs on Friday was due to the forced liquidation of positions held by the multibillion dollar family office, Archegos Capital Management, according to a source with direct knowledge of the situation.
Archegos Capital was founded by the former Tiger Management equity analyst, Bill Hwang.
Media stocks ViacomCBS and Discovery, which have seen massive gains this year, came under unusually heavy selling pressure late this week and were said to be at least two of the stocks in question, along with the Chinese internet names Baidu, Tencent, Vipshop and several others.
IPO Edge first reported the news.
ViacomCBS and Discovery closed down more than 27% on Friday, with Viacom off more than 50% for the week while Discovery slid 45%. The companies have been heavily shorted amid investor skepticism about their long-term prospects in a crowded media landscape.
For the week, Baidu was down more than 18%, Tencent more than 33% and Vipshop more than 31%.
CNBC reached out to Archegos Capital, but calls and emails were not returned. The source said the forced sales were likely related to margin calls due to heavily leveraged positions.
CNBC has also learned that Teng Yue Partners, an Asia-focused fund run by another former Tiger Management analyst, Tao Li, was negatively impacted by drawdowns in several of its key holdings. Though the fund was said to be down in March, it was still positive YTD, according to the source.
CNBC has also reached out to Teng Yue.
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