Margin lending industry to face headwinds

The Australian margin lending industry contracted slightly in 2016 due to volatility in equity markets and is expected to continue to face more headwinds, according to Investment Trends.

The 2016 Margin Lending Investor Report, which studied Australian margin lending users' attitudes and behaviours, found that margin lending investors had become more ‘savvy risk managers', with a stronger intention to borrow more through margin loans.

Additionally, the intention to increase margin lending debt among investors who already had a margin loan was stronger in 2016 than a year before.

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According to the report, the falling satisfaction also prompted margin lending investors to switch providers more often, with more margin lending clients looking for a new lender this year than in 2015.

The Reserve Bank of Australia (RBA) said that a number of active margin lending accounts and margin debt outstanding fell by five per cent (to $11.8 billion) in the 12 months to June, 2016.

At the time of the study, the average investor was expecting the share market to deliver capital gains of 2.6 per cent in the next 12 months, which was down four and six per cent compared to 2014 and 2015, respectively.

Investment Trends' research director, Recep Peker, said: "The margin lending industry continues to face headwinds from turbulent share market conditions, and the resulting bearish sentiment among investors".

"Despite this adversity, it is noteworthy that the number of margin lending investors fell at the slowest annual rate since the GFC."


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