Securities borrowing and lending for retail investors

  • Business
  • Friday, 18 Jan 2019

Latest offering: Maimoonah and Tajuddin hitting the gong to mark the launch of Affin Hwang IB’s securities borrowing and lending facility for retail investors.

KUALA LUMPUR: Affin Hwang Investment Bank (Affin Hwang IB) has launched its securities borrowing and lending (SBL) facility for retail investors and is initially targeting to achieve RM50mil in securities lending in 2019.

With this launch, Affin Hwang IB’s SBL facility is the first in the country to be widely made available to retail investors.

“Retail investors continue to play a significant role in the domestic capital market.

“Therefore, Affin Hwang IB, in collaboration with Bursa Malaysia, is excited to offer this new product to retail investors to potentially enhance their idle assets’ performance,” said Affin Hwang Capital group managing director Datuk Maimoonah Hussain at the launch.

SBL enables investors to lend equity assets or shares which they already own but do not intend to sell immediately to Affin Hwang IB.

This enables retail investors to earn interest income from lending their assets, thus potentially gaining more returns over and above the dividends they would normally receive, Affin Hwang IB said.

According to SBL equity finance’s senior associate director Karu Ramesh Kumar, shareholders who lend out these assets would be able to receive dividends and other entitlements in the duration when the shares are lent out.

However, these shareholders would not be able to vote or attend the companies’ AGM and EGM.

“Affin Hwang IB, as the borrower, would usually lend the shares out again to other offshore borrowers and local banks. We have so far only opened up for retail lending and not for retail borrowing,” Karu said at a briefing.

The borrowing fee for the SBL facility ranges from 0.5% to 12%.

According to Karu, the actual rate charged would depend on the stocks. For example, stocks which have a high short interest and are not owned by many people would see the fees going up.

“Bursa now has 229 stocks (available for short selling), and out of this, fewer than 100 names are borrowed and used, less than 50%.

“Within this range, it would depend on supply and demand – which are the shares that have large free floats in the market and that would determine the demand for that particular time,” Karu said.

“On one extreme, there is MALAYAN BANKING BHD. It is the top index stock and many people hold this stock and anyone can supply to you. So, the fees would be very low.

“On the other extreme, there may be a smaller company where there is a lot of demand and everyone is looking to borrow the stock and they are willing to borrow at a higher fee,” he added.

The SBL facility was launched by Bursa for the local stock market in 2007 and is being used by institutional investors today.

Bursa said the launch by Affin Hwang could help boost retail interest in the stock market, as it would encourage retail investors to join the institutional players by using the facility to enhance returns from their idle assets.

“As at Dec 2018, there were 1.87 million retail accounts in our marketplace holding a portfolio worth RM137.3bil.

“Premised on this, investors can generate additional income by lending out their idle securities holdings in SBL transactions, and potentially increasing the overall return from their investments,” said Bursa CEO Datuk Seri Tajuddin Atan.

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