Smaller markets in Asia contain the odd hidden treasure deep in client asset pools and should not be forgotten or overlooked, says a securities lending expert.

Jim Aris, head of equity trading for EMEA & APAC at Deutsche Bank Agency Securities Lending, says Thailand and Singapore shouldn’t be ignored despite being outside the top five largest sec lending markets in the region.

Although the likes of Japan, Hong Kong and South Korea attract the most attention Aris says Singapore, the sixth largest based on IHS Markit lendable, remains a key hub to Southeast Asian markets. 

He explained: "During the first part of 2018 Singapore loan values dropped by a quarter compared to last year which might have thrown some lenders off the scent but weighted average spreads have seen an increase year to date with the average currently around 135bps."

Aris suggests the key facet in the contraction of loan balances year-on-year was the reduction in demand for stocks from within the industrial and financial sectors and equity markets ballooning in the latter part of the year.

"Examples like Jardine Matheson, Keppel Corp and Noble Group reflect significantly reduced loan activity during the first two months of 2018," he explained.

That said, Aris says revenue opportunities have emerged in sectors such as healthcare and materials which have both seen an increase in borrower demand.

"Popular names have been Raffles Medical Group and more recently Midas Holdings, helping to drive daily revenue opportunities to double where it was year-on-year for the same period," he added.

Securities lending revenues declined in 37% in Singapore during 2017, according to IHS Markit, moving the country behind Malaysia as the 6th most revenue generating equity market in Asia.

“The declines in revenue in Singapore came entirely as the result of declining balances, as average fees were up,”  IHS Markit analyst Samuel Pierson told Global Investor.

Meanwhile in Thailand, which is the seventh largest market based on IHS Markit lendable, Deutsche Bank's Aris says demand is often driven by the hedge between the local and foreign lines. 

He continued: "Loan values have remained fairly consistent with 2017 dropping just 6.5% year-on-year. However, weighted average spreads have once again seen an increase year to date, with the average around 215bps as reflected by DataLend figures. 

"This year we have seen good demand for consumer staples reflecting an increase year-on-year of 269%, in names such as Charoen Pokphand and Thai Union Group.

"Other sectors reflecting an increase in demand have been, information technology and energy, with names like KCE Electronics, PTT and Energy Absolute, providing good revenue opportunities and helping to boost the overall year-on-year figures for the same period by approximately 20%."