New investors flocked to China’s stock market at the fastest pace in 14 months in June as mainlanders sought to cash in on the world’s best-performing major benchmark this year. New stock accounts rose 47 per cent year on year to 1.55 million last month, according to data by the China Securities Depository and Clearing. It was the biggest gain since April 2019, when the number of new traders increased by 58 per cent. Overall, China added 7.98 million equity investors in the first half, the data showed. China’s stocks have staged a rapid run-up over the past four months, with the benchmark Shanghai Composite Index rising as much as 30 per cent from a March low, as the Asian nation’s economy emerges from the economic fallout of the coronavirus pandemic and the central bank releases a record amount of liquidity to spur growth. It has gained 5.1 per cent so far this year. The wealth effect has also prompted investors to snap up newly launched mutual funds and increase their leveraged stock buying. Chinese investors are dipping into the world’s largest pool of household savings, which, according to the People’s Bank of China data stood at 82 trillion yuan (US$11.7 trillion) at the end of last year. The outstanding balance of leverage buying has meanwhile increased 33 per cent this year to as much as 1.36 trillion yuan, the highest in five years. The addition of new investors in June brought the tally of China’s stock traders to 167.7 million, the largest such group in the world. While the total equals the entire population of Bangladesh, the army is mostly composed of individual investors that contribute to more than 70 per cent of the transactions on the mainland’s exchanges. Xi Jinping’s trillion-yuan baby, the Star Market, is poised for the next spurt of growth. Here’s why The bull run on the mainland’s stocks showed signs of faltering last week , when the Shanghai Composite Index tumbled almost 4 per cent on Friday amid rising confrontation between Beijing and Washington that saw the closure of consulates in tit-for-tat retaliation. The gauge rose 0.3 per cent on Monday. While foreign investors pulled a combined 24.8 billion yuan out of Chinese stocks through the Stock Connect with Hong Kong last week, Citic Securities, the nation’s biggest publicly traded brokerage, called any dip a buying opportunity, citing a US-China conflict would only cause a psychological impact and the Trump administration was not likely to take more concrete action before the US presidential election in November. “Stand-alone geopolitical and diplomatic [spats] would only hurt sentiment in the short run, and wouldn’t cause concrete repercussions through the domestic economy and the financial markets,” analysts led by Qin Peijing at the brokerage wrote in a research note dated Monday. The widening valuation gap between the ChiNext index of smaller companies and the large caps will probably set trading up for more volatility going forward, according to Hong Hao, managing director at Bocom International Holdings. The companies on the ChiNext are more than five times as expensive as those on the Shanghai Composite, the biggest premium in almost a year, Bloomberg data showed. “While long-term valuation is supportive of the large caps, the instinct to trade out of human avarice will blind the longer-term picture of a future in five or more years,” he said. “The volatility in the expensive ChiNext will continue to roil sentiment. And as such, the market will remain unsettled for now.”