Gains in China, fueled by optimism around the technology sector and easing trade tensions with the US, are losing momentum amid profit-taking. The HK.cash contract is down more than 2%, as the market grows concerned that authorities may return to a deleveraging stance and force more brokers to tighten financing conditions.
- In August 2025, China’s stock market added more than $1 trillion in value, reaching its highest levels in a decade. The rally has been driven by strong inflows from local investors and a broader improvement in sentiment following the de-escalation of trade disputes with the US.
- The surge has sparked fears of overheating. Sinolink Securities raised margin deposit requirements on new financing contracts to 100% to curb excessive use of leverage.
- Some mutual funds have also introduced daily purchase limits. For instance, the feeder fund of the GF Star Growth Index ETF capped new inflows at just 100 yuan, one of the most restrictive measures during the current bull run.
- Trading volumes on mainland exchanges climbed to 3.1 trillion yuan ($433 billion), the second-highest level on record. Meanwhile, the outstanding balance of margin financing rose above 2.1 trillion yuan – its highest since 2015, when the market was in the midst of a speculative bubble.
- The number of new brokerage accounts opened by retail investors jumped 71% year-on-year in July, highlighting a strong “FOMO” effect and a massive wave of retail capital entering the market.
- Analysts note that speculative bubbles may already be forming in certain segments, but the latest financing restrictions are aimed mainly at protecting brokers and clients from potential losses, rather than signaling that the rally has already peaked.
Beijing has a track record of regulatory interventions during both sharp declines and rapid rallies. Since 2023, authorities have tightened rules on short selling and raised margin requirements for funds, measures that were reinforced again in 2024.
Source: xStation5
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