Stocks reach 44-month high

The Shanghai stock exchange stretched its bull run to two weeks, with the composite index closing at 3,020 points on Monday after peaking at a 44-month high of 3,041 points during trading.

Economists warned that the buying frenzy may put China's plan to ease its monetary policy on hold and may also pose a risk to individual investors.

The Shanghai Composite rose 2.81 percent over the previous trading day on Monday. The upbeat market is mainly driven by the performance of banks and securities firms. Leading securities firms such as CITIC Securities and Founder Securities saw their shares surge to the daily limit of 10 percent on Monday.

The Shanghai Composite Index has surged over 45 percent since the start of July. During the past two weeks alone, it rose by 18 percent.

On Friday, daily turnover on the Shanghai and Shenzhen stock exchanges topped 1 trillion yuan ($162 billion), the best performance of the mainland capital market and also an all-time high among global capital markets.

The market has drawn an increasing number of new investors and many dormant accounts were also reactivated during the past few weeks.

China's newly opened stock accounts from November 24 to December 5 reached 97,000 daily, compared with 29,000 in the first 11 months, and peaked at 179,700 on Friday, data from China's Securities Regulatory Commission (CSRC) showed Friday.

Some experienced investors have been considering raising their exposure amid the soaring market.

"I have been struggling to make this decision [raising investments in the stock market]. But I decided to go for it otherwise I may regret missing this opportunity," a Beijing-based investor surnamed Zhang told the Global Times at a branch of Haitong Securities on Monday morning, while he was busy checking stock information on his smartphone.

"Once the market reaches a consensus that a bull market is coming, investors will pile in, as missing the window may mean that a chance to make quick money is missed," said Dong Dengxin, the director of the Financial Securities Institute of Wuhan University of Science and Technology, adding that only in China do you see such a "crazy bull market."

But only a small number of people can profit from it, at the cost of most investors, he said.

Experts noted that the launch of the Shanghai-Hong Kong Stock Connect program on November 17 as well as the central bank's decision to lower interest rates for the first time in two years on November 22 has triggered the current frenzy.

"The whole market expects the central bank to lower interest rates again to reduce small firms' financing costs, thus I think the bull market will prevail for a while," a Shanghai-based stock fund manager told the Global Times on condition of anonymity.

However, while some experts predict that the central bank may cut interest rates again or even cut banks' reserve requirement ratio (RRR) soon, some believe that the current bull market may put the government's plan to ease monetary policy on hold.

Lu Ting, an economist at Bank of America Merrill Lynch, told the Global Times on Monday that the central bank may delay an expected RRR cut in mid-December, given the current hot capital market and another interest rate cut before the end of the year is very unlikely.

The CSRC said on Friday that institutional investors reported a net stock purchase of 30.9 billion yuan from November 24 to December 4, while individual investors bought stocks worth 65.9 billion yuan, indicating a stronger interest among retail investors.

However, experts warned of potential risks in the bullish market, as major economic data shows that the economy is still facing strong downward pressure and no clear improvements have so far been observed in the overall performance of listed firms.

Unlike the capital markets in developed economies, whose bull market could last for five to seven years, the bull market in China is much shorter and unpredictable, said Dong. "The stock market's performance has exceeded the growth of listed companies," he said.

Li Daxiao, the director of research at Yingda Securities, noted that although China is set to experience an extended bull market, it's "overheating" at present. "A tip for individual investors: Never borrow money or sell property to buy stocks," he said.