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Analysts warn of ‘double edged sword’ in China market rally as investors indulge in frenzied, risky trading

Shareholders watch the stock market in a securities business hall. Nanjing, Jiangsu Province, China, 6 July 2020.

Costfoto | Barcroft Media | Getty Images

China’s recent stock market rally is raising fears that it’s being driven by retail investors indulging in leverage-fueled risky trading which caused a spectacular crash back in 2015.

Analysts say they are monitoring levels of margin trading, or the practice of borrowing money from brokerages to trade.

That comes as mainland Chinese markets surged in early July. In the first two weeks of this month, the Shanghai composite rocketed 14%. The CSI 300 index jumped more than 20%, and the Shenzhen composite soared 17%.

That rally drove the China Securities Regulatory Commission to issue a warning to investors to stay away from lenders&