SunGard sees US equity balance boom
08 August 2014 New York
Image: Shutterstock
Balances on loan for US equities have risen 70 percent since the collapse of Lehman Brothers, according to an analyst at SunGard’s Astec Analytics.
Astec Analytics data shows that balances on loan for US equities have grown from 13.5 billion shares in September 2008 to more than 23 billion at the end of June of this year—a rise of some 70 percent, according to David Lewis.
“While our client base, and therefore the breadth and depth of the data we cover, has grown substantially over this period, that growth alone cannot account for all the observable increase in loan balances,” he wrote.
“Adjusting for our own growth of customers and coverage dulls this value somewhat, but it certainly does not take it into negative territory.”
Lewis also looked at the S&P 500, which has recovered more than 189 percent from its March 2009 low, and argued that “significant” short positions investors may be “positioning themselves for a correction before the top has been reached”.
Stocks in companies from high technology markets such as biotechnology and social media are trading at “very high multiples”, suggesting that they could be behind the S&P 500 surge.
Lewis wrote: “Short interest for specific securities can tell us a great deal about the individual security, particularly when compared with its peers, but put together they can give some guidance as to the level of expectations that the bubble may indeed be about to burst.”
“Looking at all North American equities on loan over the last 12 months shows an increase in balance of about 35 percent. Some of this could well be attributed to an increasing use of equities as collateral and a continuing growth in our customer base, but neither can alone justify a 20 percent increase in arguably the world’s biggest securities lending market.”
“With increasingly good economic news around the world, there could be new growth opportunities returning to the more traditional industries, which would in turn release investments from sectors that have arguably become too crowded, where the pressure to buy and be included has perhaps been a force for rising prices.”
Astec Analytics data shows that balances on loan for US equities have grown from 13.5 billion shares in September 2008 to more than 23 billion at the end of June of this year—a rise of some 70 percent, according to David Lewis.
“While our client base, and therefore the breadth and depth of the data we cover, has grown substantially over this period, that growth alone cannot account for all the observable increase in loan balances,” he wrote.
“Adjusting for our own growth of customers and coverage dulls this value somewhat, but it certainly does not take it into negative territory.”
Lewis also looked at the S&P 500, which has recovered more than 189 percent from its March 2009 low, and argued that “significant” short positions investors may be “positioning themselves for a correction before the top has been reached”.
Stocks in companies from high technology markets such as biotechnology and social media are trading at “very high multiples”, suggesting that they could be behind the S&P 500 surge.
Lewis wrote: “Short interest for specific securities can tell us a great deal about the individual security, particularly when compared with its peers, but put together they can give some guidance as to the level of expectations that the bubble may indeed be about to burst.”
“Looking at all North American equities on loan over the last 12 months shows an increase in balance of about 35 percent. Some of this could well be attributed to an increasing use of equities as collateral and a continuing growth in our customer base, but neither can alone justify a 20 percent increase in arguably the world’s biggest securities lending market.”
“With increasingly good economic news around the world, there could be new growth opportunities returning to the more traditional industries, which would in turn release investments from sectors that have arguably become too crowded, where the pressure to buy and be included has perhaps been a force for rising prices.”
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