Margin calls spike, investors head for the exit

John Kavanagh
The high level of volatility in the Australian equity market in the June quarter has prompted more investors to close their margin loan accounts, with the result that the number of client accounts in the market is at its lowest level since 2006.

The big equity market sell-off in May (when the S&P/ASX 200 fell about 10 per cent) caused a spike in margin calls. The number went up from 0.56 margin calls per 1000 clients per day in the March quarter to 1.11 margin calls per 1000 clients per day in the June quarter, according to Reserve Bank data published yesterday.

As a consequence, there was a 9.1 per cent fall in margin loan balances in the June quarter and a 6.3 per cent fall in the number of client accounts.

Margin loan balances have fallen 25 per cent over the past year - from $18.1 billion in the June quarter last year to $13.6 billion in the latest quarter.