More leverage for equity investors

Share market volatility late last year failed to spook many customers of margin lenders. A net 7000 people opened new margin lending during the December 2007 quarter, according to the latest Reserve Bank of Australia quarterly data on the sector.

The total value of margin lending increased 5.3 per cent to $37.8 billion compared to the September quarter, when the aggregate credit limit increased only 1.9 per cent to $76 billion, with the value of the underlying security up 2.8 per cent $92.9 billion.

December quarter average daily margin calls fell to 0.79 per thousand clients, compared to 1.04 for the September quarter, which are the highest margin call levels in almost three years.

The number of client accounts has now reached 200,000, a 3.7 per cent increase in three months but a 21.4 per cent increase for the past twelve as investors chase increased returns leveraging into equities, during a period where the market peaked and has since retracted heavily.

In January, Australia's largest online broker CommSec processed a record of around 2100 margin calls in one day, which followed the previous day's record of approximately 800 margin calls.

"Usually when there is some volatility you would get 100 or a maximum of 200 calls," said Matt Comyn, managing director at CommSec in a January interview.

The March margin call average per day is expected to be high, potentially eclipsing the September 2001 quarter of 8.04 daily margin calls per 1000 clients.