ISLA: global equity markets in focus
11 September 2018 London
Image: Shutterstock
As at 29 June, there were circa €950 billion of equity securities on-loan from an available lendable supply of just over €12 trillion, according to an equity markets report by the International Securities Lending Association (ISLA), featured in association’s Securities Lending Market Report, released on 10 September.
ISLA stated the aforementioned result represented an increase in securities on-loan of over 10 percent compared to reported balances at the end of 2017.
“With underlying equity indices broadly flat over the period, most of the reported growth
in on-loan balances and lendable would suggest real increases as opposed to asset price inflation”, ISLA said.
ISLA’s evidence of growth in securities being made available for lending provides some “clear evidence that institutional investors are either returning to lending or considering it for the first time”.
ISLA stated that whilst the growth in securities being made available for lending could reflect a broader shift of thinking within the investment management community, it said the reported increase in on-loan balances may represent more immediate tactical trading opportunities.
Within its report on global equity markets, ISLA broke down continents separately and affirmed the differences in trading patterns over the first six months of this year.
In North America, ISLA found equity lending grew by some 15 percent between January and June this year.
It said: “Whilst we cannot be specific around the causes of this growth, increased
political uncertainty that is feeding through into economic concerns is fuelling much of this growth.”
“Hedge funds and other arbitrage players are trading into the anomalies created partly by the current political regime. Although it is not the remit of this publication to debate the merits or otherwise of the current US political agenda, its broader impacts across the capital markets arena can increasingly be seen through the lens of the securities lending markets.”
In Europe, ISLA said the picture was somewhat different as it saw a steady growth in on-loan balances from January through to early May, “reflecting some seasonality in trading”.
ISLA reported that from early May, however, on-loan balances fell away steadily in line with general economics and trading opportunities up to the half-year end.
Though on-loan balances in Europe still closed some 10 percent up over the six month Period, it found.
ISLA said of the UK’s equity markets: “Again, general political uncertainty in Europe
and, in particular, Brexit is a likely cause of some of this underlying demand.”
“As Brexit becomes clearer or the political uncertainties heighten ahead of next March, we would expect to see increased volatility both here and in related markets.”
ISLA stated the aforementioned result represented an increase in securities on-loan of over 10 percent compared to reported balances at the end of 2017.
“With underlying equity indices broadly flat over the period, most of the reported growth
in on-loan balances and lendable would suggest real increases as opposed to asset price inflation”, ISLA said.
ISLA’s evidence of growth in securities being made available for lending provides some “clear evidence that institutional investors are either returning to lending or considering it for the first time”.
ISLA stated that whilst the growth in securities being made available for lending could reflect a broader shift of thinking within the investment management community, it said the reported increase in on-loan balances may represent more immediate tactical trading opportunities.
Within its report on global equity markets, ISLA broke down continents separately and affirmed the differences in trading patterns over the first six months of this year.
In North America, ISLA found equity lending grew by some 15 percent between January and June this year.
It said: “Whilst we cannot be specific around the causes of this growth, increased
political uncertainty that is feeding through into economic concerns is fuelling much of this growth.”
“Hedge funds and other arbitrage players are trading into the anomalies created partly by the current political regime. Although it is not the remit of this publication to debate the merits or otherwise of the current US political agenda, its broader impacts across the capital markets arena can increasingly be seen through the lens of the securities lending markets.”
In Europe, ISLA said the picture was somewhat different as it saw a steady growth in on-loan balances from January through to early May, “reflecting some seasonality in trading”.
ISLA reported that from early May, however, on-loan balances fell away steadily in line with general economics and trading opportunities up to the half-year end.
Though on-loan balances in Europe still closed some 10 percent up over the six month Period, it found.
ISLA said of the UK’s equity markets: “Again, general political uncertainty in Europe
and, in particular, Brexit is a likely cause of some of this underlying demand.”
“As Brexit becomes clearer or the political uncertainties heighten ahead of next March, we would expect to see increased volatility both here and in related markets.”
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