The Chinese stock market continues to rise, with the Margin balance reaching a new high. Is leverage going to trigger a bubble crisis?

Since April, the Chinese stock market has unexpectedly rebounded, with the Shanghai Composite Index reaching a ten-year high, and the CSI 300 Index rising over 20% from this year's low. The margin trading balance in China's onshore stock market has climbed to 2.28 trillion yuan, surpassing the record set in 2015, leading to discussions on whether excessive leverage could trigger another bubble crisis.

The Chinese stock market has been continuously rising since April.

Since April, the Chinese stock market has begun to rebound unexpectedly, partly reflecting the market's optimistic sentiment that breakthroughs in artificial intelligence and efforts to reduce excess capacity will revitalize economic growth. In just the past month, the market capitalization of the stock market in China has increased by nearly one trillion dollars, the Shanghai Composite Index has reached a ten-year high, and the CSI 300 Index has also risen more than 20% from its low point this year.

The latest official data shows that the number and total scale of newly registered hedge funds in July have risen to the highest level this year. The number of new retail stock accounts opened has also grown by 71% compared to the same period last year. At the same time, household deposits in China have decreased by 0.7% from the historical high in June to 160.9 trillion yuan, indicating that investors are putting their funds to use.

On 9/3, the market is optimistic before the military parade, and Goldman Sachs expects a further pump of 10%.

Goldman Sachs analysts have raised the target price for the Shanghai-Shenzhen 300 Index, predicting that the index may rise about 10% over the next 12 months. They noted that the index has valuation support, and market positions are also favorable for an increase.

Many people expect that the Chinese authorities will maintain market enthusiasm before the military parade on September 3. China has historically supported the stock market before significant political events to establish a stable image. But can the upward trend continue after the parade?

China's Margin balance climbs to a new high, is leverage risking a bubble crisis?

According to Bloomberg data, the margin trading balance in China's onshore stock market has risen to 2.28 trillion yuan (, approximately 320 billion USD ), surpassing the historical record of 2.27 trillion yuan set in 2015. In August, traders increased such leveraged positions daily, except for three days.

Many people have compared the current stock market situation to that at the beginning of the boom-bust cycle in 2015. At that time, Margin trading surged, driving the stock market to soar, but the subsequent crackdown on such leveraged activities triggered a collapse in the stock market.

Despite the recent expansion of margin trading, the scale of the Chinese stock market has almost doubled over the past decade. As of Monday, the proportion of leveraged purchases to the total market value is 2.2%, slightly above the 10-year average, but far below the peak of 4.6% in 2015.

However, Morgan Stanley ( also warns that in order to sustain this wave of Rebound, improvements in corporate fundamentals and stronger policy support are needed.

This article discusses the continuous rise of the Chinese stock market, with Margin balances reaching new highs. Could leverage lead to a bubble crisis? Originally appeared in Chain News ABMedia.