Asia Hedge Funds and Wealthy Clients Face Steep Losses in AI Selloff

Hedge fund managers and brokers across Asia fielded panicked client calls on Friday after a sharp overnight selloff in US equities revived concern that the unwind of AI bets has further to run, Bloomberg reported. Wealthy clients from Taiwan to Hong Kong faced margin calls on leveraged bets, and some in Hong Kong braced for steep losses on structured notes after being forced to take delivery of shares at a loss. The MSCI Asia Pacific Index fell as much as 5.3%, after a Nasdaq 100 rout on Thursday erased a record $2.3 trillion in market value. South Korea's Kospi plunged as much as 8.8%, triggering a circuit breaker. The selling is driven by expectations that Democrats, now holding both chambers of Congress, will push for tougher AI regulation and slow data center construction. Losses spread across the industry. Hong Kong's Aspex fell 16% in last month's technology rout, Valliance Asset Management's Long-Short Master Fund lost 6.7% in October, and China-focused long-only quant strategies dropped more than 10%, erasing their gains for the year, according to China Merchants Futures. Goldman Sachs prime brokers estimated Asia stock pickers lost 9.4% last month, trimming the year's gain to 14%, while China-focused funds fell 11% in October, leaving 16% for the year. ExodusPoint Capital Management and Millennium Management also suffered losses, AI-focused Value Aligned Research Advisors plunged 33% last month, and Rob Pohly's Samlyn Capital is dismissing senior analysts after cutting exposure to nearly every sector except global financials. Chris McGuire of Eagle's View Capital Management said the moves were as extreme as almost anything he had seen since the dot-com bubble, and that holders concentrated in the same stocks or sectors had created more one-way momentum than in a long time. He said his fund gained an estimated 2.5% or more this month. Hiroyuki Ueno of Sumitomo Mitsui Trust Asset Management said his firm was fielding questions about the selloff from all sides, and that sell-side clients were struggling to explain developments to their customers. Hiroshi Namioka of T&D Asset Management said the market was behaving irrationally, stopping short of calling it outright panic but saying investors found it difficult to see upside. Travis Lundy, a Hong Kong-based independent analyst, said the drop looked more like a position blowout than a fundamental rethinking of the future, with a bad October triggering early-November unwinds that cascaded. A Hong Kong broker said staff worked overtime and the only advice was to exit quickly, though forced-liquidation risk was somewhat reduced after clients were urged weeks earlier to add collateral.