The historical review of A-share securities lending business
It started since June, 2019
START Market opened, T0 strategies got approved by regulators
The guideline of mutual funds participating in securities lending transaction for refinancing business came out.
The amount of A-share securities lending is less than 10 billion yuan
It entered into a high growth stage since Feb,2020
Mutual funds completed patch lending system upgrade, Securities principle trading team traded ETFs by themselves, which have enriched the hedging tools for quant private funds
Profit return from newly listed stocks buying led to more declining of cost of stocks lending
The amount of A-share securities lending quickly increased into 140 billion yuan
Year2021, after era of prevalence of newly listed stock buying strategies
After the profit return from newly listed stocks buying fell, whether some other arbitrage strategies can continue to enlarge the securities lending amount?
As of end of Oct, the securities lending amount is 150 billion yuan.
The direction which private funds strategies moving on
According to statistics, as of end of Oct,2021, the AUM of private funds reached to 6 trillion yuan, among them, stock long only strategies accounting for about 65%, while stock long short strategies (including market neutral strategies) account for only 5%, which is less than 40% of which in oversea market
Strategies brief analysis:
Market neutral strategies accounting for more than 60% of stock long short strategies, quant stock long short strategies and fundamental stock long short strategies are still in an embryonic stage in mainland China market and the AUM of which are still tiny.
Index enhancement strategies is about 600billion yuan currently, accounting for 10% of the total market (being included into stock long only strategies), this strategy has received lots of attention recently, within the securities lending tools further improving, this strategy has great development potentialities in the future.
For the unique strategies of stocks lending and newly listed stocks buying strategies in A-share market, the peak AUM of such strategies was about 80 billion RMB, accounting for about 1% of the total market. But due to the new rule of bidding price released in September, the return of such strategies had fallen significantly recently and the AUM for the strategies are also falling. Block Trade Arbitrage Strategy(Buy stocks with block trade and sell with stocks lending), current AUM is 20 billion yuan, accounting for about 0.25%.
This strategy is expanding with the lenders are developing.
If insurance companies can participant in securities lending transactions for refinancing in the future and A-share market can achieve the fully implementation of registration system reform, the cost for securities lending will further decline, the securities lending resource will be more abundant, benefiting to stocks long short strategy.