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Securities Lending Market Report | H2 2024

>>> EMEA >>> APAC

Fig 6 - S&P Global Fig 7 - S&P Global
European Equity Market APAC All Securities Lendable & On-Loan

3.70 0.25 2.50 0.25
Lendable Value (Trillions €) 3.50 0.15 On-Loan Value (Trillions €) Lendable Value (Trillions €) 1.50 0.23 On-Loan Value (Trillions €)
3.60
0.24
0.20
2.00
0.22
3.40
3.30
0.21
0.10
1.00
0.20
3.20
0.50
0.05
3.10
3.00
0.18
Jan 2024
Jan 2024 Feb 2024 Mar 2024 Apr 2024 May 2024 Jun 2024 Jul 2024 Aug 2024 Sep 2024 Oct 2024 Nov 2024 Dec 2024 0.00 0.00 Feb 2024 Mar 2024 Apr 2024 May 2024 Jun 2024 Jul 2024 Aug 2024 Sep 2024 Oct 2024 Nov 2024 Dec 2024 0.19
Group Lendable On-Loan Balance Group Lendable On-Loan Balance
European equities indices suffered a turbulent H2, navigating political and geo-political uncertainty, stubborn inflation On the face of it, APAC equity markets indices fared well through 2024 with many posting double digit gains. However, if
and slowing growth. Equity market returns were relatively flat over the period, with the region is now lagging US equity we look under the surface, we find a mixed story across the region’s markets. Taiwan’s tech heavy index performed best,
index performance by record margins. The outcome of the US presidential also weighed on European equity indices. driven upwards by the boom in AI related stocks, particularly the semiconductor industry.
Protectionist policies and support for domestic growth from the Trump administration fuelled expectations the US will Japan maintained its upward trajectory from 2023, buoyed Hong Kong, a traditionally strong revenue generating
outperform the EU and China.
by the success of long-term governance reforms, a positive market, saw suppressed borrow activity with its Hang Seng
From a securities lending perspective, hard to borrow Regional expansion remained a key theme through H2 economic environment and mild inflation leading to a index trading at multi year lows throughout the first three
revenues continued to be compressed as the region lacked 2024 for global financing markets, with the Middle East cautious easing of monetary policy. Meanwhile, Hong Kong’s quarters due to slowing economic growth in China and
any meaningful sector themes, with revenue highly crowded a source of increasing interest. Securities lending in Saudi Hang Seng index recovered moderately from a low base a prolonged housing crises with many Chinese property
to a small number of specials. Stubborn inflation and higher- Arabia continues to be at the forefront of the regional at the start of the year but remains challenged by sluggish companies struggling to repay debt. Lending volumes
for-longer interest rate rhetoric drove demand for those expansion however we expect demand to increase across growth and a prolonged property crisis on the Chinese remained low, as stimulus measures aimed at lifting the
distressed companies servicing high debt payments. The other regional market as we look forwards. The hedge fund mainland. Korea’s Kospi was the only major Asian market to Chinese economy did little to boost market sentiment.
industry saw attrition in the GC space with significant impact industry continues to look for new sources of alpha, with decline. After tracking global trends in the first half of the As a result, hedge funds maintain a risk off stance with
felt from the pricing pressures in funding markets making interest centred across previous untapped jurisdictions. year the Kospi faced mounting headwinds in the second insufficient concentrated demand to create conditions for
synthetic sourcing a lot more attractive than physical borrow Given the ongoing growth in capital markets in Saudi half as concerns over semiconductor competitiveness, tariff specials activity.
for short coverage. Regulatory pressures and overall net long Arabia, this represents a key focus for Prime Brokers and fears and a prolonged political crisis at home, all weighed In other APAC markets, there were regulatory headwinds to
bias pushed balances lower with borrowers internalising Agent Lenders alike, especially given the revenue declines negatively on consumer sentiment. contend with, such as the short selling ban in South Korea,
greater volumes of their book, which coupled with highly elsewhere in EMEA. As is often the case in new and Securities lending demand across the APAC markets was where regulators continued to shape and implement a new
attractive synthetic pricing, made for a challenging period. emerging lending markets, lending fee remain elevated with also mixed through 2024, very much aligning with the market wide short selling regime. Thailand also sought to
There is continued emphasis on regulatory efficient demand currently exceeding supply. underlying market conditions. The net impact of the varied review its short selling and securities lending framework
structures, which typically prompt increased trading conditions across the APAC markets meant that year-over- undertaking a yearlong consultation with industry
flow. Those such as GMSLA pledge and Smart-Bucketing year average loan balances and revenues were relatively flat. participants. Both markets continue to work to produce the
provided more cost-effective ways for borrowers to source The trajectory was by no means linear with a soft start to finalized versions of their regulations at the time of writing.
their supply needs, with these constructs reducing their the year being counterbalanced by a stronger finish.
regulatory capital requirement. Overall, regional balances Thematically, in addition to AI or technology driven borrow
fell ~15%, with a concentration of revenue coming from key Taiwan generated the most traditional securities lending activity, there was demand across the electric vehicle
markets. France was the highest generating EMEA market revenue amongst its regional peers. Semiconductors and sector where competition, subsidies and tariffs have driven
by some margin, with Germany and UK completing the top related stocks experienced meteoric rises in stock prices pricing pressures, contributing to short interest in the car
3. Revenues in the region declined 27% over 2024. in 2024, driving the TAIEX to record highs and providing manufacturers themselves as well as battery manufacturers
fertile ground for directional shorting activity. This landscape and infrastructure companies. This has also impacted index
on its own would have provided ample opportunity but rebalancing demand. For example, in Australia, where some
coupled with the lack of conviction towards Hong Kong lithium miners‘ stocks removed from the ASX200 and MSCI
and the continued short selling ban in Korea, meant the indices, driving elevated fees in those companies that were
attention in Taiwan was even more focused. Japan was a deleted.
dependable market from a volume perspective, providing
long term lending stability but suffered from a dearth of
specials, despite capital raising activity being highest among
its regional peers.