Country Profiles: Up and Coming Markets

Country Profiles: Up and Coming Markets


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 ago.

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

 “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 going forward.”

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 participants.

“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 Fannin.

Current key challenges include the need for local currency collateral and for counterparts to transact under local law. These issues will require resolution if Indonesia’s potential as a jurisdiction for securities borrowing and lending is to be fulfilled, and industry participants are continuing to engage with regulators to reach that end-goal.


The general regulatory framework for securities borrowing and lending (SBL) in the Philippines was put in place in 2006. SBL remains bilateral and is mostly for fails settlement. Parties to the SBL are usually trading participants and investment banks.

“The Philippine stock market has yet to experience the full vibrancy offered by SBL given the limited supply and the absence of short selling,” said Hans B. Sicat president and CEO of the Philippine Stock Exchange. “With the launch of ETFs and the expected introduction of short selling in the market, the PSE realizes the need for increased access to SBL.”

Sicat says the exchange has been in regular contact with international banks throughout the development process of its SBL and short selling regulations. “We think that there is significant interest, which we hope to realize by providing regulations that will be acceptable to these participants.”

“Increasing the supply available for securities lending and getting our short selling programme off the ground is therefore one of the priority initiatives of the exchange.”

 ICBC Standard Bank: Expert eye on repo

The Philippines has a clean netting opinion for GMRA activity. Although there is currently an active market with local banks in international securities, it would seem that this is not the main area of focus going forward. The financing of local assets against US dollar is of great interest to local banks and financial institutions.

According to Wei-Shee Chia of ICBC Standard Bank: “Regional assets, denominated in local currencies, are becoming more accessible in the global markets. ICBC Standard Bank has local knowledge and risk appetite to provide this product in the Philippines and is actively looking to expand its footprint in the country.” 

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