Insight - Caution over share margin financing

“We continue to closely monitor trading using margin financing, ’’ said Bursa Malaysia. “To date, trading in the marketplace using margin financing is not large.’’ Bigger exposure: An investor monitors share market prices at a brokerage in Kuala Lumpur. With the recovery in the stock market, the industry exposure to share margin financing has since climbed back to RM6.1bil as at Sept 15.

SHARE margin financing, which refers to borrowing from a bank or broker to buy shares, can help investors make a profit in an upmarket.

But when share prices go down, these investors can face margin calls, where they are asked to top up money into their accounts or close out their positions and sell their shares, to bring their accounts back to the minimum value.