Margin calls more likely as market stumbles

The risk of a margin call is greater in a declining stock market, as Australia and world markets are experiencing once again. Most investors with margin loans are conservatively geared, at an average ratio of 43 per cent, and margin calls are relatively rare, with an incidence of 1.04 margins calls per 1,000 clients per day in late 2004, according to Reserve Bank data. That compares with 7.8 margin calls per 1,000 clients each day following the slump in stock markets in the aftermath of the US terrorist attacks in September 2001.

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