Rare deleveraging wave in a decade: global equity hedge funds accelerate retreat in November.

November 11 — The latest monitoring report released by Morgan Stanley's Prime Brokerage team on Tuesday shows that global equity hedge funds staged the most dramatic de-risking in more than a decade in the first week of November. A broad-based wave of liquidation is spreading across global markets.

In Asian markets, hedge funds are compressing risk exposure through a two-way operation of "cutting longs and adding bearish shorts." This phenomenon is particularly pronounced in South Korea's market, which carries a high tech weighting. Selling pressure was mainly led by fundamental stock-picking funds, while multi-strategy, macro, and quant funds took the opportunity to close out previous short positions, with clear divergence in institutional strategies.

On the other hand, Goldman Sachs data shows that deleveraging has still not fully cleared out. The total leverage of its US fundamental long/short funds plunged 8.7 percentage points in a single week, the largest drop since the outbreak of the pandemic in March 2020; however, looking at the full scope of PB clients, overall total leverage remains as high as 314.2%, at the 85th percentile of the past year.

JPMorgan's assessment is more positive. Dubravko Lakos-Bujas, the bank's head of global markets strategy, believes that this round of adjustment is essentially concentrated deleveraging by momentum traders, and "capitulation selling has already gone quite deep," with technical indicators suggesting that short-term oversold and bottoming signals are accumulating.