Young Chinese are plowing money into the country’s A-share market in record numbers in an attempt to cash in on a week of historic gains, but experts caution that they are playing a risky game.

The A-share market — made up of major mainland-based companies — went into overdrive after Chinese policymakers unveiled a series of economic stimulus measures in late September. Between Sept.23 and 27, the Shanghai Composite Index surged 12.8%, recording its largest single-week gain since November 2008.

Trading was halted for a week during last week’s National Day holiday, but hype over the market continued to build thanks to an explosion of bullish media and social media commentary.

The frenzy convinced massive numbers of young Chinese to try their luck at stock investing — often for the first time.

A representative from brokerage firm Minsheng Securities told domestic media that the number of people applying to open new accounts with the company had soared four-fold, with new clients born in the 1990s and 2000s accounting for more than half of the applicants.

Sinolink Securities, another major broker, said that 70% of new accounts opened with the firm over the past week were set up by people born in the ’90s and ’00s.

But experts warn that these young investors could end up making painful losses if the market turns — and events on Wednesday underlined this point.

After reaching a fresh high on Tuesday, the Shanghai and Shenzhen markets both plunged on Wednesday. The Shanghai Composite Index closed down 6.62%, its largest single-day fall since February 2020, while the smaller Shenzhen index fell 8.15% for the day.

According to domestic securities firms, young investors in China tend to use a more diverse range of information sources than experienced investors and prefer simple investment tools that can deliver quick returns. Yet, they often fail to consider risk management.

In recent days, several major brokerages including CITIC, Guosen, and Sinolink Securities have written to their new clients advising them to set clear investment goals and to invest prudently. They urged clients not to gamble everything on stocks.

One Gen-Z investor surnamed Qiu told Sixth Tone that she had invested 10,000 yuan ($1,415) into the stock market since Sept. 30. “I haven’t touched my stock account for a long time,” said Qiu. “After I saw the growth, I just decided to test the water. Any losses will be completely manageable.”

(Header image: Investors monitor stock prices at a brokerage house in Nanjing, Jiangsu province, Oct. 8, 2024. VCG)