China’s investors borrowed a record $322 billion to buy stocks this year, but sharp corrections and regulatory scrutiny are causing jittery sentiment. Margin financing hit a record 2.3 trillion yuan, with some speculators diverting consumer loans to stock trading. Retail investors and regulators are concerned about bubble risks in China’s second-largest economy.

Regulators are considering measures to cool the market as leveraged bets reach new heights. Chinese tech bellwether Cambricon plunged 15% after doubling in value, attracting speculators who borrowed over 10 billion yuan to bet on the surging stock. Margin financing has made the market more vulnerable, with concerns of market overheating.

Consumer lending is on the rise in China, with some stock investors tapping into it as a lucrative borrowing source. Retail investor James Liu finds consumer loans attractive due to lower interest rates compared to brokerage margin loans. Banks are cautioning against illegitimate use of credit card loans for investments as asset risks for lenders increase.

Despite the growing trend of consumer lending for stock buying, the government and banks are urging caution. Sinolink Securities raised margin requirements in response to the increasing risks. Policymakers are supportive of the equity market but wary of boom-bust cycles, aiming to rein in excessive speculative flows to prevent market instability.

Read more at Yahoo Finance: Analysis-Record $322 billion in China loans for stock bets feeds volatility and prompts caution