Pasla/RMA: Shift in Japan securities lending

Pasla/RMA: Shift in Japan securities lending

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The Japanese securities lending market has shifted over the past year, according to a panel of securities finance experts.

Yoshihiko Aoyama, director, BlackRock Asset Management North Asia, said: “Since Abenomics there has been increased momentum in seeking alpha.”

Although the industry did not see a huge rise in supply and demand for lending securities as a result of last year’s bull market, there has been an increase in demand for specials.

“From the broker or borrower side we’ve seen heightened interest in revenue return in terms of specials,” said Bryan Kipping, head of global financing services, UBS.

Specials now account for almost 8% of the Japanese securities lending market and they command higher fees, according to data from Markit Securities Finance.

Average fees commanded by shares trading special rose to 600 basis points, the highest level in more than three years. Markit considers specials as shares that command high fees of more than 100 basis points.

The sectors that have dominated specials are healthcare and IT where Gunho Online Entertainment, DeNa and 3D Matrix had increased interest from short sellers.

Kipping predicted that Japan’s onshore pension funds will look increasingly at securities lending: “We haven’t had the same level of focus on return with onshore pension funds as we have with offshore pension funds but it’s only a matter of time before onshore pensions – especially government funds – will look for greater revenue streams and securities lending is one way to achieve this.”

However demand to borrow securities is likely to remain flat while the Japanese stock market still trades at high levels.

The panellists spoke at the Pasla/RMA Asian Securities Lending Conference in Tokyo.
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