Scars leave in­vestors too scared to dare with shares

The Courier-Mail - - NEWS -

PAINFUL mem­o­ries of the global fi­nan­cial cri­sis are stop­ping in­vestors from tak­ing risks.

De­spite Aussie shares climb­ing back to­wards record highs, the once-pop­u­lar strat­egy of mar­gin lend­ing – where in­vestors bor­row to buy shares and use them as se­cu­rity for their loan – is still at about a quar­ter of its lev­els of a decade ago.

The lat­est Re­serve Bank data shows there are $11.7 bil­lion in mar­gin loans out­stand­ing, down from $41.6 bil­lion in late 2007, be­fore the GFC.

In­vest­ment an­a­lysts do not ex­pect a re­bound soon, even though our share­mar­ket has climbed 15 per cent in a year.

“There was a lot of dam­age done in the GFC and those scars run deep,” Baker Young Stock­bro­kers an­a­lyst Toby Grimm said. “The mar­ket is noth­ing like it was be­fore the GFC. The ex­u­ber­ance is not there. Peo­ple got taught a very valu­able les­son that the debt is what kills you.”

If shares se­cured against a mar­gin loan drop be­low a prea­greed level, the lender can make a mar­gin call – where if they don’t re­ceive an im­me­di­ate cash top-up pay­ment from the in­vestor, they can sell their shares from un­der them.

Mr Grimm said in­ter­est on mar­gin loans was higher than other forms of bor­row­ing. BUSI­NESS P24

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