Approved stock numbers creeping back up

margin loan

Post-GFC, margin loans have been out of favour with many investors. From a peak of 248,000 margin lending client accounts in December 2007, the most recent Reserve Bank of Australia (RBA) statistics indicate that client numbers are now back to mid-2006 numbers, with approximately 170,000 client accounts in existence. Behaviour by our financial institutions, though, indicate that some institutions are beginning to feel more bullish. What are the indications? The average number of ASX companies on financial institutions? Acceptable Securities Lists has risen quite significantly in recent times.

How does this work?

One broad way in which a financial institution can reduce margin lending investment risk is to reduce the number of acceptable securities. Canstar analysis has found that just prior to the GFC, the average number of ASX securities on the Acceptable Securities Lists of the financial institutions we rate was 520. This number had plummeted to an average of 390 by December 2009. Even by December 2012 the average number of securities was only 419, but by December last year that number had risen to 446 securities.

 

  Average number of ASX companies on acceptable securities list Average number of ASX 200 companies on acceptable securities list
Date Average No. Companies Average No. Companies
Dec-06 520 185
Dec-09 390 180
Dec-12 419 189
Dec-13 446 192

Source: Canstar. Based on data obtained for 2014 margin lending star ratings.

 

Managing Director of ANZ subsidiary E*TRADE, Peter Mullin, concurs with the increased optimism. “We see the market for margin lending growing over the next year or two,” he says. “As confidence in the market continues to build, investor appetite for gearing is increasing. With our comprehensive list of approved securities and full integration with E*TRADE’s share trading platform, ANZ Investment Lending offers a great way for clients to build their investment portfolio.”Source: Canstar. Based on data obtained for 2014 margin lending star ratings.

E*TRADE provides lending on both the highest number of ASX 200 stocks and the highest number of stocks overall in the margin loans assessed as part of Canstar’s recent margin lending star ratings research, a factor in ANZ?s award-winning position. “To determine if a security can be included on our Approved Securities List, we consider fundamentals such as the underlying strength of the balance sheet, liquidity, share price volatility and other publicly available news flows,” says Mr Mullin. “In addition, the diversified feature of the ANZ Investment Loan rewards investors who diversify their portfolio. Diversification allows investors to reduce risk by spreading investments across a number of stocks. Utilising the benefits of a diversified portfolio, ANZ investment lending is able to offer borrowing against almost twice as many stocks and in many cases at higher borrowing levels for each investment.”

Readers can download the Canstar margin loans star ratings report here.

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