Margin calls escalate

As prices for blue-chip stocks fall more investors who use margin loans to fund share purchases are receiving margin calls. A margin call is made when the value of a customer's share portfolio falls below pre-agreed levels, forcing them to make up the shortfall by either selling shares or injecting extra cash. Most investors are conservatively geared, but the growth in margin lending means that the number of people potentially affected is higher than ever. Figures from the Reserve Bank show that the number of people taking out margin loans has grown from 141,000 in June 2005 to 186,000 now. The total value of the loans has increased from $17.9 billion to $36.2 billion over the same period.

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