SHANGHAI (Reuters) - Chinese official media on Thursday urged retail stock investors to be prudent, while regulators moved against illegal margin lending, betraying Beijing's concern that a much-touted bull run could turn into a repeat of a spectacular boom and bust five years ago.
Investors didn't heed the message, pushing benchmark indexes higher for the eighth day in heavy turnover and taking gains so far this month to 16%, testing top securities regulator Yi Huiman's pledge in June to refrain from market intervention.
"The tragic lesson of abnormal stock market volatility in 2015 remains vivid, cautioning us that we must promote a healthy and prosperous stock market in a correct posture," the China Securities Journal said in an editorial, referring to the last crash that sent shockwaves through global markets.
The newspaper, which is affiliated with state-run Xinhua News Agency, said investors should respect the market, manage risks and pursue rational investments.
The warning came just days after an editorial in the same paper said China needs a bull market to build strength "in a changing world", adding fuel to the rally.
Thursday's commentary came hours after the China Securities Regulatory Commission (CSRC) published a list of 258 illegal margin lending platforms and their operators in an apparent move to calm markets.
In a live broadcast late on Tuesday, Xiao Gang, who was CSRC chairman during the last crash, expressed remorse that disaster could have been averted if regulators had cracked down on illegal lending earlier.
The lesson from the meltdown is that "the valley is as deep as the height of a mountain. The higher prices rise, the more violently, or more rapidly, they fall," he said.
In the last rout, more than $5 trillion was wiped off the capitalization of the Shanghai and Shenzhen stock markets after they peaked in June 2015 and the government was forced to mount an unprecedented rescue. The economy and financial system are on rockier ground now as the country slowly recovers from the coronavirus crisis and faces heightened Sino-U.S. tensions.
Liu Wencai, a former official at the China Financial Futures Exchange cautioned that many retail investors could get burned.
"A further rapid rise in the stock market could lure in more money, including bank deposits, leaving those savers - who are mostly late comers - vulnerable to a stampede," said Liu, who is now founder of Shanghai-based risk-management consultancy D-Union.
But investors' euphoria remained unabated on Thursday, with money gushing into stocks and mutual funds, pushing the valuation of sectors such as tech into frothy territory. Shanghai's tech-heavy STAR Market is now trading at roughly 100 times earnings.
Gao Xiqing, a former vice chairman of CSRC, said that after years of reform Chinese regulators should be mature enough to refrain from paternalistic interference in normal trading.
"Regulators should not be given the responsibility of judging whether the market is too high or too low, bubbly or not," Gao said in a live broadcast this week.
"Investors should evaluate quality of listed companies themselves."
Wen Hao, CEO of investment advisor Hao Fei Brothers, brushed aside concerns of a bubble, saying the rally reflects China's early economic recovery and hopes for a technology revolution.
"Now is different from 2015. Leverage is not the main driver, and valuation of blue-chips is still low. It's safe," said Wen, who forecasts the Shanghai main index <.SSEC> will gain another 16% to 4,000 points.
(Reporting by Winni Zhou, Samuel Shen and Andrew Galbraith; Editing by Gerry Doyle and Kim Coghill)