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By Charlotte Yang and Zhao Runhua / Feb 26, 2019 02:51 PM / Finance

Photo: Bloomberg

Photo: Bloomberg

Chinese stock investors are trading more as the Shanghai and Shenzhen bourses rebound after months of poor performance. On Monday, total trading volume of mainland-traded stocks — known as A-shares — on the two exchanges together exceeded 1 trillion yuan ($149.6 billion), the largest daily volume since Nov. 27, 2015.

But in the eyes of the securities watchdog — the China Securities Regulatory Commission (CSRC) — this isn’t all good news.

Why?

Reports have been circulating that unregulated margin financing — in which investors use borrowed funds from unregulated channels such as trust companies and online margin financing platforms to buy stocks — is resurgent once again, increasing the risk of market turbulence.

Rampant unregulated margin financing was a big contributor to China’s 2015 stock market crash.

“We have noticed an increase in recent reports of unregulated margin financing (“场外配资”),” the CSRC said in a notice published Monday.

“All securities companies must strictly implement the appropriate regulations regarding brokerage business and margin trading clients, strengthen the monitoring of abnormal transactions, and conscientiously do a good job in technical system security protection,” it added.

Related: Trading Volume of Mainland Shares Tops 1 Trillion Yuan for First Time in 3 Years

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