Geared investors hopeful on share market


By Kristen Crawford

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Margin lending investors as a group were the most optimistic in their share market outlook, with recent stock market falls regarded as investment opportunities by many, according to new industry data from Investment Trends.

The research house’s “2015 Margin Lending Investor Report” collated survey data from over 2000 investors and found investor appetite for increasing margin debt remained healthy, with both current and potential margin lending investors viewing recent share market falls as a gearing opportunity.

Further, its modelling estimated there were 96,000 investors who were not currently using margin lending, but were planning to begin doing so in the next 12 months.
Investment Trends head of research for wealth management Recep Peker said the next wave of investors tended to be particularly nervous about the impact of market volatility on margin lending investments.

“This presents an opportunity for both financial planners and stockbrokers as many of these investors are seeking education and guidance before entering the market,” Peker said.

The research also revealed the number of total investors in the margin lending industry had decreased by 3000 since 2014, but at the same time the total margin debt amount had increased by 4 per cent, which was due in part to strong performance of investments in the direct channel.

“This is an outcome of those who have margin loans borrowing more,” Peker added.

Further, the average loan size per margin lending client reached $180,000, up 8 per cent from September 2014 and slightly higher than the pre-global financial crisis high.

“The industry grew year on year despite turbulent market conditions,” Peker said.

Self-directed margin loans comprised 45 per cent of outstanding debt, according to the report, up from 34 per cent in September 2010.

Of all margin lending users, 56 per cent agreed Australian shares were undervalued following recent falls in the market, up from 31 per cent in 2014.

Notably, only 13 per cent of users said recent volatility was holding them back from using margin lending, Peker said.

“For advisers involved with margin lending, it is important to note that how investors use margin lending is evolving – they are becoming more technical in their approach to margin lending,” he said.

Rather than focusing just on the share market, margin lending investors tended to look at other assets and also the tax benefits involved in a margin loan, he added.

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