Chinese margin debt hits record $322B as regulators signal caution

Chinese investors borrowed about $322 billion to buy stocks this year, which pushed indexes up, but this week’s drop and tougher signals from regulators have shaken ￰0￱ margin financing reached a record 2.3 trillion yuan ($321.55 billion) this ￰1￱ traders also routed consumer credit into brokerage ￰2￱ wave of liquidity helped push Shanghai shares to 10-year highs last week despite weak growth and ongoing trade and geopolitical ￰3￱ flipped on Thursday when the blue-chip CSI300 Index fell 2% after Bloomberg News reported, citing sources, that authorities are studying ways to cool ￰4￱ Jiang, who borrowed 200,000 yuan to chase quick gains, said the week’s swings were unnerving as many stocks moved 3% to 5% in a day.

“If you haven’t taken profit at a peak, you wonder if you should cut the loss after you start bleeding,” said the 35-year-old programmer in ￰5￱ said she plans to reduce leverage so she “could sleep well at night.” Leveraged activity has long been part of China’s market, but growing unease among retail players and a sharper tone from watchdogs highlight the risk of froth in the world’s second-largest ￰6￱ caution, China’s top securities regulator Wu Qing pledged last week to “consolidate the good trend of the market” by advancing “long-term, rational, value” ￰7￱ stocks no longer a safe bet Speculation around big tech names has cooled quickly, as per Reuters .

Cambricon, a stock Jiang owns, sank 15% on Thursday after its market value doubled to 668 billion yuan in ￰8￱ AI chipmaker, often compared with Nvidia , has been a magnet for leveraged punters; exchange figures indicate that more than 10 billion yuan of borrowed funds piled into the ￰9￱ build-up amplifies downside risk, said Steven Leung, executive director of institutional sales at UOB Kay Hian in Hong ￰10￱ record level of margin finance, he said, leaves the market more ￰11￱ added, “If there’s any measure trying to cool down the market, these people, especially those using margin financing, have to get out first.” James Liu, a retail investor in Sichuan, said he taps consumer credit with rates near 3%, below the 4%–5% typically charged for margin at ￰12￱ banks prohibit directing such funds into equities, Liu said he moves money through several accounts and sees little chance of being ￰13￱ ahead despite market support Banks are pushing ￰14￱ Minsheng Bank, Hekou Rural Commercial Bank, and Wenshan City Commercial Bank have recently warned customers not to use credit card loans for ￰15￱ consumption still weak, “less creditworthy consumers remain as active borrowers, leading to higher asset risks for lenders,” ratings firm Moody’s ￰16￱ makers continue to back the market but want to avoid excess.

“The government has made it very clear that they are supportive of the equity market,” said Eugene Hsiao, head of China equity strategy at Macquarie Capital. “That said, policymakers are wary of boom-bust cycles similar to the margin-trading bubble in 2014-2015,” he said, expecting the government to “rein in excessive speculative flows.” Get up to $30,050 in trading rewards when you join Bybit today