Malaysia is the seventh largest market in Asia Pacific in terms
of equity lending revenues, according to IHS Markit data. It is
certainly one to watch, with revenues jumping 40% over the
year. Although the total remains low by regional standards at
$32m it is over 10 times that generated five years
Last year was also a strong year in terms of average balances,
growing 30% to $933m, from inventories that increased by a
similar percentage to $9bn. This was achieved with fees staying
flat at 3.2%. The most revenue generated for lenders came from
Maxis and Digi.com.
"There has definitely been an increase in business in
Malaysia," says Rakesh Patel, head of equities, Asia-Pacific,
HSBC. "It is the one ASEAN market that really pops, in terms of
an increase in activity. It is certainly an interesting market
It is uncertain whether the rapid progress can be sustained, at
least in the short term, as interest peaked during the year.
"The outstanding notional values came up quite quickly last
year – but in the meantime it seems that the demand
has reduced a little," says prime broker based in the region.
"There is a functioning market in place now."
Bursa Malaysia offers two securities borrowing and lending
models: central lending agency (SBLCLA) and negotiated
transaction (SBLNT). In the SBLCLA model Bursa Malaysia acts as
the central lending agency for all SBL transactions between
authorised lenders and borrowers. The SBLNT provides an
on-shore route to agree transactions an over-the-counter basis
and report to its representatives.
India is at the early stages of securities lending relative to
other Asia markets, but it is evolving and starting to mature
and become more open to international market
"India looks very interesting, having gone through a
de-monetarisation phase," says HSBC’s Patel.
"Hedge funds and clients I speak to think India looks like a
worthwhile opportunity to explore. India is at the early stages
of securities lending relative to other Asia markets. But as an
equity market it is maturing, it’s evolving, which
will hopefully follow through into the lending."
India is a very large market but one where the authorities have
not wholeheartedly accepted the merits of SBL. A separate
source who requested to remain anonymous says: "The Indian
authorities have been relatively averse to having instruments
for shorting capability onshore so it has been challenging from
a securities lending perspective. As the market evolves they
will understand that lending adds to liquidity, so it ends up
being a good thing for everyone. India is at the early stages
of that now."
Indonesia remains one of the region’s most
exciting opportunities. Its untapped liquidity profile and
economic growth expectations make it an attractive frontier
market for investors, according to Dane Fannin Head of Capital
Markets, Asia-Pacific, Northern Trust.
While it does not have a securities borrowing and
infrastructure in place, this makes for a viable offshore
model. In addition, "we are aware that regulators have been
consulting with their counterparts in other markets to progress
Indonesia’s market further, says