'We must pay close attention to risks in the market, most importantly whether the technology system and trading platform will be able to handle such large trading volumes,' the governor of the exchange, Geng Liang, said in a statement.

However, the stock market appeared to shrug off the latest warning yesterday, and Shanghai's benchmark index closed up 2.18 per cent at 2,945.26 points, on heavy turnover of 131.4 billion yuan.

Trading volumes have repeatedly hit record highs in recent weeks as the market continues a winning streak that saw benchmark indices rise more than 130 per cent last year, making it by far the best performing major market in the world last year.

Rising prices, combined with a flurry of huge initial public offerings, pushed the total market capitalisation on the country's main exchange from 2.3 trillion yuan to 7.2 trillion yuan.

'The stock exchange itself should be able to handle the huge increase in turnover but many brokerages have outdated technology and have seen delays and glitches in trading,' Haitong Securities analyst Zhang Qi said. 'They didn't do any upgrades when the market was going down [during the prolonged bear market between 2001 and 2005] and it will be quite hard to address the problem immediately.'

A huge rise in trading volume crashed the Tokyo Stock Exchange trading system in November 2005 after a trader input a stock price incorrectly, and last November a technical glitch disrupted trading for retail investors in Hong Kong.

In the past few days the China Banking Regulatory Commission (CBRC), State-owned Assets Supervision and Administration Commission (Sasac) and even the National Bureau of Statistics have all made policy statements aimed at dampening sentiment.

It seems the only agency yet to publicly announce any action to slow the market is the China Securities Regulatory Commission (CSRC), which has been busily working behind the scenes issuing warnings to mutual fund managers, suspending the launch of new funds and speeding up the supply of new shares in the market.

'Because the CSRC has not come out with any formal cooling policy, the market has decided there is still no consensus among senior policymakers over whether the government should step in to calm things down,' said HSBC's regional equity strategist Steven Sun.

The CBRC has initiated an investigation into the illegal use of bank loans for stock investments. Sasac has warned state-owned enterprises against speculative stock investments while hinting it may permit them to start selling some of the 7.9 trillion yuan of state-owned shares that are not permitted to be sold or traded on the exchanges.