Chinese investors are borrowing unprecedented sums to buy domestic equities, pushing margin trading to its highest level on record and intensifying a liquidity-driven rally that began in April, reports Bloomberg.
The outstanding value of margin trades in China's onshore stock market reached CNY2.28 trillion (US$320 billion), surpassing the previous peak of CNY2.27 trillion set in 2015. Traders increased leveraged positions on all but three trading days in August, underscoring strong retail participation and speculative momentum.
The rally in the world's second-largest stock market has been fuelled by optimism over China's advances in artificial intelligence and government efforts to reduce industrial overcapacity. With limited fiscal and monetary stimulus, analysts say household investment of China's US$23 trillion cash reserves could be pivotal to sustaining the bull run.
'Margin financing was likely the main source of new funds entering the stock market in August,' wrote china Merchants Securities analyst Zhang Xia. He noted that active stock funds recorded net inflows and the registered size of equity-focused hedge funds expanded markedly since July.
Mr Zhang added that these trends suggest residents are accelerating their allocation of capital into equities. The surge in margin financing reflects growing risk appetite among retail investors, who have historically driven market swings in China's volatile trading environment.
Analysts caution that while margin-fuelled rallies can amplify gains, they also heighten vulnerability to sharp corrections. Regulators have previously intervened to curb excessive leverage, particularly during periods of heightened volatility. For now, however, the momentum appears to be building, with liquidity continuing to flow into the market.
SeaNews Turkey
The outstanding value of margin trades in China's onshore stock market reached CNY2.28 trillion (US$320 billion), surpassing the previous peak of CNY2.27 trillion set in 2015. Traders increased leveraged positions on all but three trading days in August, underscoring strong retail participation and speculative momentum.
The rally in the world's second-largest stock market has been fuelled by optimism over China's advances in artificial intelligence and government efforts to reduce industrial overcapacity. With limited fiscal and monetary stimulus, analysts say household investment of China's US$23 trillion cash reserves could be pivotal to sustaining the bull run.
'Margin financing was likely the main source of new funds entering the stock market in August,' wrote china Merchants Securities analyst Zhang Xia. He noted that active stock funds recorded net inflows and the registered size of equity-focused hedge funds expanded markedly since July.
Mr Zhang added that these trends suggest residents are accelerating their allocation of capital into equities. The surge in margin financing reflects growing risk appetite among retail investors, who have historically driven market swings in China's volatile trading environment.
Analysts caution that while margin-fuelled rallies can amplify gains, they also heighten vulnerability to sharp corrections. Regulators have previously intervened to curb excessive leverage, particularly during periods of heightened volatility. For now, however, the momentum appears to be building, with liquidity continuing to flow into the market.
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