Margin lending set to pick up in the next year
The margin lending industry has recorded a decline of $42 billion from five years ago to $12.7 billion as at September 2012 - but a large number of investors intend to start borrowing over the next 12 months, according to the latest findings from Investment Trends.
Despite reporting a decline in the number of active margin-lending investors from 119,000 in September 2011 to 95,000 in September 2012, the market saw an inflow of 6000 new borrowers as well as another 4000 previously 'dormant' borrowers.
"Historically, only a portion of those who said they intended to commence borrowing actually did so (24 per cent in 2011 and 20 per cent in 2012)," Investment Trends chief operating officer Erica Blewitt said.
"If the conversion rate remains at 20 per cent, 11,000 potential borrowers would be expected to commence margin lending over the next 12 months, compared to only 6,000 over the previous year."
In addition, 9,000 dormant clients are predicted to return to active margin lending activities this year.
According to the survey, 39 per cent of current margin lending investors expected to increase their borrowing levels over the next year, while a further 41 per cent said they would maintain their current levels and 21 per cent indicated a reduction.
The majority of respondents intending to increase their borrowing cited as reasons good buying opportunities (61 per cent), undervalued assets (40 per cent) and borrowing more as investments increase in value.
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