Yesterday, U.S. stocks shed more than $2 trillion in a single day. Today, it’s Asia’s wealthy picking up the phone—not to say hello, but to meet margin calls. Bloomberg’s report today: a slew of wealthy clients in Taiwan and Hong Kong had piled too heavily into leveraged AI bets. When the Nasdaq plunged last night, brokerage phones lit up, and in Hong Kong, some investors were forced by structured notes to buy stocks at a loss.
Here are the numbers: MSCI Asia-Pacific fell as much as 5.3%, while South Korea’s KOSPI plunged 8.8%, triggering a circuit breaker. Hong Kong’s Aspex was already down 16% last month. One AI fund lost 33% in a month, and Goldman Sachs estimates that Asia-focused equity funds lost 9.4% last month.
On one side are the people watching gleefully: “Hedge funds are getting theirs too? You spend all day hyping the AI revolution and going all-in with leverage, then you’re the first to run when things fall.” On the other side are those still insisting: “This isn’t a collapse in fundamentals, it’s a position unwind. AI investment still needs to happen, and a dip is an opportunity.”
My take: I’m halfway on the gleeful spectators’ side this time—when smart money is forced to sell, don’t rush to catch the falling knife. The scariest thing about a position unwind is that you don’t know who’ll get the next margin call. Wait until they’ve finished selling and cleared out the leverage before talking about buying the dip.
What about you? Are you sitting this market out, or itching to scoop up the “shares smart money is dumping at a loss”?
Here are the numbers: MSCI Asia-Pacific fell as much as 5.3%, while South Korea’s KOSPI plunged 8.8%, triggering a circuit breaker. Hong Kong’s Aspex was already down 16% last month. One AI fund lost 33% in a month, and Goldman Sachs estimates that Asia-focused equity funds lost 9.4% last month.
On one side are the people watching gleefully: “Hedge funds are getting theirs too? You spend all day hyping the AI revolution and going all-in with leverage, then you’re the first to run when things fall.” On the other side are those still insisting: “This isn’t a collapse in fundamentals, it’s a position unwind. AI investment still needs to happen, and a dip is an opportunity.”
My take: I’m halfway on the gleeful spectators’ side this time—when smart money is forced to sell, don’t rush to catch the falling knife. The scariest thing about a position unwind is that you don’t know who’ll get the next margin call. Wait until they’ve finished selling and cleared out the leverage before talking about buying the dip.
What about you? Are you sitting this market out, or itching to scoop up the “shares smart money is dumping at a loss”?