The number of current margin lending investors appears to have bottomed, with significant numbers of ‘next wave’ and ‘dormant’ investors aiming to utilise margin lending over the next 12 months, according to the Investment Trends September 2012 Margin Lending Investor Report.
The number of active margin lending investors in Australia declined to 95,000 in September 2012 from 119,000 in September 2011, but there are signs of growth for the next 12 months.
While there has been a downward trend in the number of current margin lending investors, the report shows the ‘next wave’ rising significantly, from 30,000 in 2011 to 57,000 in 2012.
Taking into account that not all borrowers will act on their intent, Investment Trends said the market can still expect 11,000 potential borrowers to commence margin lending in the next 12 months, compared to only 6,000 over the previous year.
Investment Trends’ chief operating officer Eric Blewitt attributes the dip to general market deleveraging, seen across corporate and personal balance sheets, causing the total outstanding debt in the market to fall from around $42 billion five years ago to just $13 billion last year.
“We have seen a lot of flight to cash, so with that level of concern what has been happening in the market is people’s willingness and acceptance to borrow to invest has diminished, hence the general downward trend of active margin lending,” Mr Blewitt told InvestorDaily.
“It seems to have bottomed. We have seen that downwards trend. Now when we start to look forward, there are definitely some green shoots knocking around,” he said.
Investors are being brought back to the market in a search for undervalued assets and good market opportunities, he added.
“About 78 per cent of investors see Australian equities as currently undervalued,” Mr Blewitt said.
“In the wider landscape we’re seeing reduced cash rates so the risk-free rate of return is coming down [and] we’re seeing reasonable yields. So [investors] are in a position where they can actually implement a sensible, well-managed wealth accumulation strategy through gearing and the yield of the stocks.
“It’s been a bit of a gloomy past [but] there are certainly some green shoots and there is some opportunity in the market,” he said.
