Who Caused The US Technology Share To Drop By 200 Billion US Dollars And The Market Value Evaporated.

"Will it be another scene?" Technology stocks Bubble burst? "Said Zhang Gang, a large US hedge fund manager.

In the past month, the US technology stocks, which were originally highly developed and valued, seemed to be in a "magic spell". The market value of the 9 big internet listed companies suddenly evaporated nearly 200 billion US dollars, including Twitter, LinkedIn, SolarCity, Netflix, Facebook, Tesla and other popular Internet technology stocks.

End of season redemption shocks?

Financial markets have speculated that the "Curse" of US technology stocks may be related to the US securities regulatory authorities to investigate high-frequency trading and black pool trading. Because high-frequency trading occupies 60-70% of US stock trading volume, its opaque trading information often breeds a lot of insider trading risks.

In Zhang Gang's view, most hedge funds are heavily invested in technology stocks, and the probability of making frequent trades through high-frequency trading is not high.

"In fact, at the end of March, hedge funds in the US faced a lot of redemption pressure, which is one of the main players behind the big drop in technology stocks." He explained. At the end of March, most large hedge funds face annual financial audit and capital redemption. They often cash in the most profitable portfolios. On the one hand, they can raise the net value of the fund and attract new investment funds. On the other hand, they can lock in the corresponding excess profit dividends.

In fact, the top 10 technology stocks of the Nasdaq 100 index have been popular stars in recent years, such as Micron technology, Netflix and Tesla, etc., with an average increase of 134% in 2013 alone.

However, the redemption of hedge funds alone may not lead to such a big decline in technology stocks.

The tragedy of deleveraging?

Reporters learned from a number of hedge funds. U.S.A Another technology behind the "disgrace" of technology stocks is the end of hedge funds' borrowing interest rate dollars and leveraged investment in US technology stocks arbitrage.

Earlier, hedge funds put the US technology stocks in the heavily loaded stocks portfolio. One is optimistic about the US economic growth and the stock price of technology stocks has risen; the two is that these US technology stocks will use their huge cash to buy shares or profit margins to further drive up share prices.

"In 2013, hedge funds viewed this investment strategy as a risk free arbitrage." Zhang

Just speaking. But he soon discovered that this seemingly risk-free investment arbitrage mode quickly changed its flavor. As the Federal Reserve continued to adopt a loose monetary policy (QE), the interest rate of the US dollar was lower. More and more hedge funds used their technology stocks and related bonds to finance the investment bank's pledge, and then invested the money in technology stocks to enlarge leverage.

Zhang Gang revealed that he had seen the most aggressive arbitrage strategy adopted by hedge funds, investing in US technology stocks with 3-4 times leverage. It is the continuing inflow of leverage investment that keeps us technology stocks rising.

　 However, the good times are not long.

As the Federal Reserve begins to tighten its QE policy, the liquidity of financial markets decreases, forcing investment banks to reduce leverage. Hedge funds can only return bank loans through cash in technology stocks. Meanwhile, the decline in share prices of technology stocks will double the losses of hedge funds.

No one wants to be the last escaper. With the surging selling of hedge funds, financial markets plunged into panic.

Last Friday, the "panic index" NDX volatility index (VXN) rose by 11% based on the Nasdaq 100 index, the highest in three months, 35% higher than the "panic index" VIX of the S & P 500 index. The gap between the two countries has been the biggest since 2007, suggesting that investment institutions' concern over the sharp fluctuations in share prices of technology stocks far exceeds that of the US stock market.

Zhang Gang bluntly said that QE's tightening of leverage financing is often lagging behind. Earlier this year, when the Fed decided to tighten the QE, hedge funds felt tighter in leverage, until around March.

The result of the panic of US technology stocks is that when hedge funds are approaching the pressure of capital redemption, they can not only "gloss over" net performance but get embarrassed by net loss. Andor Capital, a hedge fund focused on technology stocks, lost 18% of its net value in March, while the big hedge fund Discovery Capital flagship fund lost 9.3% last month, forcing fund managers to cut their holdings of technology stocks.

Data show that the US stock hedge fund is likely to hit the worst Zhou Yeji since 2001 with the continued sharp fall in technology stocks at the end of March.

"Hedge funds can only accomplish their self salvation in two ways at present." Zhang Gang said that the first thing is to turn assets into investment basket stocks with relatively low valuations and stable dividends, and the two is to hedge the NASDAQ index put back on the back hand.

Data show that last Friday, the NASDAQ index dropped more than 1 million, the largest in nearly four years.

"After all, after the sharp rise last year, most US technology stocks have already been on the high side, and this share price has fallen sharply, which is more like a return to value." Zhang Gang said frankly. Current NASDAQ index shares The average price earnings ratio is 31.8, while the S & P 500 index stock price earnings ratio is only 17, making the latter become the value depression of stock investment.