Margin lending has fallen by 50 per cent from its peak last year, according to the latest quarterly monetary policy statement released by the Reserve Bank of Australia (RBA) on Friday.
The RBA statement said the fall has been accompanied by a “sharp increase” in margin calls in the December quarter to a record 10 calls per day per 1,000 clients.
It said the average for the 2008 calendar year was 4.9 calls per day per 1,000 clients, “well above” the annual average of 1.8 calls per day per 1,000 clients between 2000 and 2007.
This increased frequency of margin calls in 2008 “reflects both the extreme volatility in equity markets throughout the year and the sustained declines in share prices, which have pushed up investors’ gearing levels”.
Research house Cannex last year estimated that during November around half of all margin lending clients were either faced with a margin call, or had to take direct action to prevent one by topping up their investment or selling stock. For the related story click here.
