Morgan Stanley reviews the U.S. stock market plunge: Leveraged ETF selling supply reached $57 billion, and retail selling within 90 minutes after the market open was the second largest since 2016.

BlockBeats news, November 8 - Morgan Stanley's derivatives team stated in a note that on November 5, the net leverage ratio of US long-short hedge funds fell by 5% in a single day, the fifth-largest single-day decline since 2010, and is currently in the lowest 10% range of the historical distribution for the same period. Since June, the total exposure reduction from active trading by long-short funds is equivalent to 10.7% of total holdings' market value at the end of June, the largest magnitude in at least 10 years.

Hedge funds are currently underweight AI stocks relative to market cap weights, but AI stocks still account for 32% of their absolute exposure. The aforementioned AI stocks are defined by constituents of the MSXXAI index, covering AI technology beneficiary companies, AI power-related companies, and major hyperscale cloud providers.

On that day, the scale of selling required by leveraged ETFs hit the highest since data began in 2007, generating $57 billion in US equity selling supply. According to Morgan Stanley QDS estimates based on public data, retail investors' US equity selling within 90 minutes after the open was the second-largest since 2016. The account also noted that stock trading correlation is beginning to rise, which typically means risk-reduction behavior is spreading to a broader scope.