Stock lending: a relatively untapped market in Asia

ON A WORLDWIDE basis, some US$2 trillion worth of stocks and fixed-income securities have been lent out thus far this year. These securities-lending (or sec-lending) programmes enable institutional investors, who generally hold large portfolios, to earn income on their assets without active trading.

This passive income generation through stock lending thrives in the United States and Europe, where the majority of financial assets are held by institutions.

For example, lending out 10,000 "Company Z" shares that are currently trading at S$100 for a week, at a one per cent annualised rate, generates about S$200 (1%/52x10,000xS$100).