Margin lending industry rebounding


By Kate Kachor

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Australia’s margin lending industry experienced its first net year-on-year increase in six years in 2013, with a rise of $183 million in total outstanding margin debt, according to an Investment Trends report.

The “December 2013 Margin Lending Broker Report” revealed the $183 million rise helped lift the market from $11.3 billion in December 2012 to $11.5 billion in December 2013.

The direct investor channel showed significant improvement in 2013, up 12 per cent, or $529 million, to $4.8 billion, the report, released yesterday, said.

The financial adviser channel dropped 7 per cent, or $277 million, to $3.9 billion, it said.

The broker channel declined only slightly, falling 2 per cent, or $69 million, to $2.8 billion, it said.

"The continued decline in the size of the margin lending market since its height of $42 billion in December 2007 appears to have bottomed in 2013," Investment Trends analyst SM Shahed said.

The report also found there were fewer brokers using gearing with clients, while those who continued to gear were increasing their use of margin lending.

Among the brokers who still used gearing products, 97 per cent advised on margin lending for their clients in 2013. This was up 1 per cent from 2012, the report said.

"By the end of 2013, margin loans represented 55 per cent of total borrowing advised by brokers – a six-year high – taking share from other gearing products such as line of credit and home equity-based products," Shahed said.

The average total level of margin lending borrowing per broker rose by 34 per cent compared to 2012, the report said.

"In line with the increase in the average level of margin debt among brokers, the average size of the most recent margin loan written by brokers increased 16 per cent in 2013,” Shahed said.

In terms of future trends, the report revealed the broker channel was poised for growth in the next 12 months.

"Many barriers to increased usage of margin lending have softened among brokers, especially those relating to market volatility and interest rates," Shahed said.

"Based on their intentions, the broker channel is poised for growth over the next 12 months."

The report focused on Australian retail stockbrokers and their use of margin loans.

It was based on a survey of 466 brokers concluded in December 2013.

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