Asia Pacific Markets: Q3 2024 In Review
By Cameron Cole & Thomas Ashton, Data Specialists, Data & Analytics
October 17, 2024
The Asia-Pacific (APAC) region saw the steepest decline in lending revenue in Q3 2024, with revenue dropping by 7.2% YoY to $560 million. This was followed by North America, which posted a 6.7% YoY decrease to $1.5 billion, and EMEA, where revenue fell by 3.41% YoY, generating $392 million. Across all three regions, a common trend emerged: fees were markedly down, dropping 9.5% in APAC, 18.4% in North America, and 14.3% in EMEA. However, this was partially offset by a rise in on-loan balances, which grew 2.5%, 10.3% and 12% respectively. Despite global sluggish performance, Taiwan continues to be a hot topic, with the market generating impressive lending returns relative to the wider APAC region.
In APAC, the bulk of revenue was generated by equities, contributing $532 million, representing a 6.3% YoY decline, with fees and on loan balances down 3.9% and 2.6% respectively. Revenue from APAC fixed income lending activity also experienced a steep decline in Q3 2024, earning $29 million and down 21% YoY. Although on loan balances were up 24% YoY, this was offset by a decrease in fees by 38% over the same period.
Taiwan in Focus
Among the APAC markets, Taiwan remains a critical focal point, defying broader regional trends and solidifying its position as the leading securities lending market in APAC for Q3 2024. Taiwanese equities generated $205 million in lending revenue, up 44% YoY and driven by a 30% increase in on loan balances and 12% uptick in fees. Japan followed second in the region, earning $173 million over Q3 2024. This represents a 4.8% increase compared to the same period last year, primarily driven by 8.6% uptick in fees. Lending of Hong Kong equities contributed a further $81 million in revenue, placing the market as the third highest in region from a revenue perspective. However, of the top three spots, Hong Kong is the only market to experience a decline in revenue in Q3 2024, down 13.3% YoY, driven by a 13% decrease in on loan balances while fees remained flat compared to Q3 2023.
APAC Sector Performance
Taiwan’s impressive growth has drawn attention from market participants, particularly considering the ongoing short sell ban in South Korea, which has shifted the spotlight to Taiwan. The Information Technology (IT) sector has been the primary driver of this growth, fuelled by the surging demand for AI-related applications and semiconductor manufacturing. Regionally, the highest performing sector was the Information technology field where lending activity produced $178 million in revenue. As a global hub for semiconductor production, Taiwan faces concerns about a potential AI bubble. These concerns, alongside fears of a U.S. recession and rising geopolitical tensions across the Taiwan Strait, have contributed to the country’s robust securities lending performance. Most of Taiwan’s revenue stemmed from the Hardware and Semiconductor sectors, contributing $69 million and $60 million, respectively.
Top Performing APAC Securities
The top three highest-revenue-generating securities in APAC for Q3 2024 all originated from Taiwan, within the IT industry. Leading the way in Taiwanese equity lending was Vanguard International Semiconductors (5347 TT), a manufacturer of integrated circuits. This security saw its on-loan balances rise by 227% YoY, while fees increased by 134%, earning $9.7 million in revenue in Q3 2024 and securing its position as the top earning equity in the APAC region.
Giga-Byte Technology Co (2376 TT) generated $8.2 million in Q3 2024, placing as the second- highest revenue generating security in the region. While on-loan balances remained relatively flat YoY, fees for Giga-Byte were up 32%. While macro trends may be involved in Giga-Byte’s performance, a large lender in region points towards demand driven by convertible bond arbitrage opportunities.
Other notable performers included Novatek Microelectronics (3034 TT), which brought in $7.6 million in lending revenue. This placed the security among the top 3 revenue-generating securities in Taiwan and in APAC for the quarter. This trend has also boosted lending returns for Semiconductor ETFs, for example, lending revenue for iShares Trust Semiconductors (SOXX) was up over 200% in Q3 2024, generating just over $500,000.
While the global securities lending market exhibited sluggish performance in Q3 2024 with declining revenues across all major regions, Taiwan emerged as a bright spot within APAC, driven by strong performance in the Information Technology and Semiconductor sectors. Despite global fee pressures and economic headwinds, Taiwan’s equity markets outperformed, bolstered by rising demand for AI-related applications and semiconductor production. As geopolitical and macroeconomic concerns persist, Taiwan’s resilience underscores its pivotal role in the region’s securities lending landscape. With continued market volatility over concerns of an AI bubble, US recession and fears of a selloff in Asian chipmakers due to geopolitical tensions, Taiwan remains a key securities lending market of focus throughout 2024.