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APAC: A New Era Begins
Securities finance experts discuss Asia Pacific's trending topics including the opening of China, a post-COVID recovery, short selling bans and ESG.
As featured in Securities Lending Times
Experts from Deutsche Bank, J.P Morgan, Northern Trust, State Street Global Markets and Standard Chartered share their views on:
1. Short selling bans
Asia Pacific saw the strictest short-selling bans installed in response to heightened market volatility during the second quarter of 2020. S Korea suffered the brunt of the restrictions.
2. Worse YoY revenue decrease for 2020 compared to other regions
Driven by short selling bans, reductions in specials activity and Asia’s lack of top performance in 2020 unlike US/European COVID-theme corporate winners. Synthetic access to China provided some relief although limited in scope.
3. Regional revenue figures belie significant market-to-market disparities in revenues – Japan vs. Hong Kong
While both markets suffer from suffered from reduced balances, lack of specials, compressed yields, Hong Kong had a healthy pipeline due to timely restructuring of IPO listing rules and benefitted from China’s flows. Japan’s YoY impact was worse in part due to the a special stock, Takeda Pharmaceutical, which had significant returns in Q4 2018 and Q1 2019.
4. China’s QFII scheme - 2021 and beyond
The only major economy to report growth in 2020, China is making all the right moves - opening up of China’s A-share market and allowing lending and borrowing for foreign investors under the QFII scheme. These positives are not without challenges – the inability to strike biliterate agreements; China Securities Finance as the central counterparty; adherence to more disclosure requirements; and lastly, costs and complexity of trading.
5. ESG in APAC
As the region plays catch-up and takes a more proactive approach to managing ESG factors in their lending programmes, PASLA’s work is timely as standardization in approach and measurement is key to drive the ESG agenda.
6. APAC trends in 2021
- Assuming some semblance of new normal returns in 2021, significant focus on resiliency is expected especially around value-chain integrity.
- Against an expected back drop of increased supply with muted demand, impact on performance, yield expectations, the race among agent lenders to win mandates and other participants' interactions will be profound.
- The coming of age of Asian investors and the global focus on the region to generate additional alpha are positives developments.
- ESG-related activities will continue to accelerate driving greater consideration and practical integration in lending programmes.
Download our paper to learn more.
In the wake of 2020's market disruption and regional bans on short selling, Northern Trust's Mark Snowdon explains why APAC now boasts several promising growth opportunities.
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