Why China's World-Beating Stock Rally Is Making Investors Anxious

When a quiet resurgence in Chinese equities developed into a world-beating rally, it took many seasoned market watchers by surprise.

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BEIJING —

Chinese stocks have gained US$2.7 trillion (S$3.5 trillion) in market value in the past four months.

But there is little sign of a revival in spending by consumers and businesses that would dramatically inflate the earnings of Chinese companies.

Official data is not pointing to an economic rebound, and there are already signs that share prices may be overheating, reviving memories of a stock market crash in 2015 that burned small investors.

WHAT IS HAPPENING IN CHINA'S STOCK MARKET?

The CSI 300 Index jumped 10 per cent in August, its best performance since a rally in September 2024. Red flags have emerged. Market turnover has hit a record.

The outstanding amount of margin trades — where investors borrow money to buy local stocks in the onshore market — has surged to an all-time high, signaling a growing appetite for risk-taking.

In an effort to curb speculative fever, mutual funds have capped daily purchases of some of the year's best-performing equity portfolios. Commercial banks have tightened oversight of clients using credit cards to fund stock investments.

WHAT IS BEHIND THE SUDDEN RALLY?