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Tech sell-off due to risk aversion -Erlen Capital's

Schneller

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September sees stock buying slow due to seasonal trends

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Few catalysts to buy, valuations high, BLKBRD's Izzo says

By Nell Mackenzie

LONDON, Aug 20 (Reuters) - Big investors, fearful of

September's typical seasonal declines, exited profitable stock

positions on Tuesday, according to investors and trading company

research, a sign the selloff in tech may be driven by a broad

aversion to risk.

The tech-heavy Nasdaq and broad S&P 500 stock index

sold off sharply on Tuesday, driven by tech stocks that

have rallied hard for much of the year. Nvidia ( NVDA ) sank

3.5%, the biggest drop in nearly four months.

"This week's tech sell-off looks less like panic and more

like a broad reshuffling of risk," said Bruno Schneller,

managing director at investor Erlen Capital Management.

"We've seen crypto, high-beta tech and the AI beneficiaries

all come under pressure at the same time, which suggests

investors are cutting exposure across multiple risk assets

rather than reacting to a single headline."

A momentum shift was taking place, noted two other hedge

fund investors, declining to be named because they were not

authorised to speak publicly.

Hedge funds and asset managers were selling their winners,

they said. This theme played out earlier on Wednesday in Korean

technology stocks and China biotech-related equities, one of the

sources said.

This week's market moves could be a sign of things to come

in the weeks ahead.

BUYING EVAPORATES

September 3 has historically notched highs for the benchmark

S&P 500 index since 1928, after which stocks have fallen

most years, said Scott Rubner, head of equity and equity

derivatives strategy at Citadel Securities in a note on Tuesday.

Stock buying routinely evaporates in September as retail

buyers slow their purchases and companies buying back their own

stock stop in mid-September for regulatory reasons, Rubner said.

"After a summer of strong positioning and relentless upside,

September historically brings a shift," he added.

Currently, systematic traders such as hedge funds and trend

followers have bought all the stock they had planned to and

further appetite to push equities higher has petered out,

Citadel Securities said.

"The final week of August often coincides with low volumes

due to vacations, and barbeques contributing to upward drift in

stocks, especially in low-volume environments," said Rubner.

Plus, larger asset managers will begin to reassess or

rebalance their portfolios ahead of the quarter's end in

September.

"Mostly, we've run out of catalysts to buy more. Valuations

are high. What can you point at to justify any higher?" said

hedge fund BLKBRD's owner and founder Dan Izzo.