The number of Australians using margin loans drifted down again in 2015. As of September, there were 67,000 active margin lending investors, down 3,000 from 2014 levels.
Despite falling client numbers, the total outstanding margin debt increased 4% to $12.3bn over the year to September. This is an outcome of those who have margin loans borrowing more. The average loan size per margin loan client reached $180,000, up 8% from September 2014 and slightly higher than the pre Global Financial Crisis high.
Self directed margin loans now comprise 45% of outstanding debt, up from 34% in September 2010.
Investor appetite for increasing margin debt remains healthy, with both current and potential investors viewing recent share market falls as a gearing opportunity. More than half (56%) of margin lending users agree Australian shares are undervalued following recent falls in the market, up from 31% in 2014. Notably, only 13% say recent volatility holds them back from using margin lending.
“Margin lending investors as a group tend to be the most optimistic in their share market outlook, and recent share market falls are seen as investment opportunities for many,” said Recep Peker, Head of Research for Wealth Management at Investment Trends
Investment Trends modelling estimates there to be 96,000 investors who are not currently using margin lending services but are planning to begin doing so in the next 12 months.
“More [investors] are recognising the tax benefits of margin lending, seeing it as a part of their broader portfolio strategy, and understanding they can use it for assets other than just direct shares.” said Peker
“They are excited about margin lending for the diversification benefits offered, but tend to be more concerned about market volatility than current margin lending investors,” Peker added. “…many of these investors are seeking education and guidance before entering the market.”
The Investment Trends report provides a detailed analysis of the Australian margin lending industry, examining the attitudes and behavior of current and next wave margin lending users. This report was based on a survey of 2,038 investors in July and August 2015