Analysts warn that the hot start to the year for China’s onshore equities is showing some features of the bubble in 2015 that led to one of the worst market crashes in the country’s history.
The combined trading volume on the Shanghai and Shenzhen stock exchanges exceeded RMB 1 trillion ($149.3 billion) earlier this week, marking the highest single-day trading since November 2015. This is more than twice the average daily turnover seen on the two courses for the rest of February.
Government efforts to shore up confidence in domestic markets has so far clawed back some of 2018’s devastating losses, but the nature of the increase has some analysts asking questions.
For example, much of the fresh demand seems to be fueled by margin lending, whereby small-scale investors borrow funds from brokerages in order to buy more stocks. Caixin notes that outstanding margin loans reached over RMB 775 billion on Monday, up RMB 60 billion from earlier in the month.