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14 Securiti es Lending Market Report | June 2023 15

>>> US

Within the period, the big story in the US equity space was the turmoil across the US banking sector with failures of
Silicon Valley Bank and Signature Bank shocking global markets. The quick withdraw of bank deposits created a liquidity
shortage with contagion spreading across other regional banks. Despite these issues, major US indices were able to
weather the storm surprisingly well, seeing large gains (SP500 16%, Nasdaq 39%) for the fi rst half of the year. Additi onally,
the US navigated rising infl ati on bett er than many of its regional peers, providing greater clarity on the trajectory of
interest rates. This triggered a natural rotati on of asset allocati on into the US equity market, elevati ng valuati ons.

Fig 5 - S&P Global

North American Equity Market

16.50 0.70
Lendable Value (Trillions $) 15.50 0.66 On-Loan Value (Trillions $)
0.68
16.00
0.64
15.00
0.62
14.50
0.60
14.00

0.56
13.50
Jan 2023 Feb 2023 Mar 2023 Apr 2023 May 2023 Jun 2023 0.58
Group Lendable On-Loan Balance

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The largely upward trajectory of equity markets and the wider Directi onal demand for corporate bond ETFs conti nues given
macro uncertainty has meant investors have remained cauti ous policy rate expectati ons and funding pressures within the
in picking an appropriate entry point against a rising market. corporate debt asset class. Emerging market ETF trackers,
This has lowered investors’ convicti on to deploy broad-based especially those replicati ng an index within countries without
capital on the short side and has created an environment where a robust SBL model conti nue to att ract healthy short demand.
the demand has been heavily concentrated in a relati vely small This is largely due to relentless infl ati onary concerns and higher
number of overcrowded specials. Demand within this space fi nancing rates, with geopoliti cal concerns and slowdown in
has largely been driven by weak fundamentals or unique asset China also acti ng as catalysts for demand.
arbitrage prospects with specials revenue being close to all
ti me highs.

Similar to other regions, less established companies within the
electric vehicle sector conti nue to be a hotbed of demand given
the competi ti ve nature of the industry and growing pains to
profi tability. Corporate acti vity has cooled against the backdrop
of rising borrowing cost, with companies reluctant to come to
market at this ti me. IPO issuance has also suff ered, posti ng
some of its lowest numbers for new off erings in the past two
decades with investor appeti te for risk low.