China Traders Take on Risk as Margin Debt Tops One Trillion Yuan

Chinese stock traders are boosting the use of borrowed money to increase their buying power.

Outstanding margin debt on local bourses climbed above 1 trillion yuan ($151 billion) on Monday for the first time since January 2016 as the Shanghai Composite Index rallied 12 percent from this year’s low in May. That’s helping lifting sentiment toward brokerages, with Citic Securities Co. rising to a one-month high on Wednesday.

Still, with the government emphasizing the need for stability and reduced leverage in the financial sector, any sharp increase in borrowed money is unlikely. Margin debt -- which helped fuel the boom to bust two years ago -- is still less than half of its 2015 peak, and has barely increased as percentage of market capitalization this year. New investors have also not rushed in.

— With assistance by Justina Lee

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