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Investors capitalising with margin lending

Investors capitalising with margin lending

(09 April 2013 – Australia) A new source has reported that in recent weeks there has been a strong rise in margin lending as investors seek to capitalise on record low interest rates and rising stock prices. Margin lending – where money is borrowed to invest in shares or managed funds, had the strongest growth in three years over the first quarter.

Bendigo and Adelaide Bank, which is the equal fourth-largest margin lender, also said it had detected early signs of a recovery, with a younger cohort of generation X and Y investors driving the growth.

CommSec's margin loan book had been shrinking for the past three years until recently, but General Manager of Distribution Brian Phelps said tentative growth in February had strengthened in March, with the bank writing A$75 million in new loans in the past three weeks.

The rise comes after a three-year decline in the value of margin loans, from A$21.6 billion in December 2009 to A$12.2 billion at the end of last year.

The last period of growth was the December half of 2009, in which share prices jumped by almost a quarter as markets were spurred on by ultra-low global interest rates.

The average margin loan size has fallen to about A$65,000, compared with near A$170,000 before the global financial crisis.
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