Margin calls reach five-year peak
Research house Cannex has estimated that two in five clients using margin loans were likely to have received a margin call in the third quarter of this year.
Cannex said margin calls reached a five-and-a-half-year peak during the third quarter of this year.
The research house estimates 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.
“Even investors with what they thought were safe, diversified portfolios are not immune,” the report said.
Cannex quoted Reserve Bank of Australia (RBA) statistics that it said demonstrate that margin lending clients are now focusing on debt reduction.
In the July-September quarter the number of client margin loan accounts shrunk for the first time since 2003, from 206,000 to 202,000.
The RBA figures also show the average loan size dropped by 28 per cent since the beginning of the year, from $189,000 to $136,000, according to the Cannex report.
“What is also interesting is the increase in protected equity loans, which have almost doubled over the last 18 months, now accounting for 10 per cent of the margin loan market,” the Cannex statement said.
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