More Madness in China's Market as Margin Could Increase 25%

Bloomberg: China Walks $264 Billion Tightrope as Margin Debt Powers Stocks
Confident that China’s stock market rally still has legs, Jiang Lin recently began borrowing money from her brokerage to buy more shares.

Her newly-opened margin finance account with state-owned China Investment Securities Co. has allowed Jiang, a 29-year-old marketing executive in Beijing, to double up her bets on the vertigo-inducing rally in Chinese share prices.

“It’s worth the risk,” said Jiang, while admitting she doesn’t fully understand how margin finance works because she hasn’t had her broker explain it to her.
Margin debt is double the size of the U.S. market:
China’s margin finance now stands at about double the amount outstanding on the New York Stock Exchange, after adjusting for the relative size of the two markets.

“Regulators are aware of the risk of rising margin debt but they can’t afford to puncture the equities bubble with very draconian measures,” said Lu Wenjie, a Shanghai-based analyst at UBS Securities Co. “They want to pelt the mice without smashing the china.”
More insanity:
The authorities may also be tempted to hold off because stock valuations remain lower than levels before past market collapses. The Shanghai Composite is at about 20 times reported earnings, or less than half of the level it reached during a 2007 rally.
Because the prior crashes were so much fun. In defense of the authorities: there's no way to really stop a mania unless you permanently change the rules on margin and find ways to ban other forms of credit leaking into the market. How likely is that in China?

Wait, there's more:
The bans on Citic, the nation’s biggest brokerage, Haitong and Guotai Junan expire on Thursday, leaving the firms free to seek new clients again. They have the capacity to do so, said Zheng Chunming, a Shanghai-based analyst at Capital Securities Corp. He calculates that Chinese brokerages can boost margin loans to as much as 2 trillion yuan if they raise their capital and leverage ratios to regulatory ceilings.
Another 25% increase in margin is potentially on the way.

How's Elliot Wave working in this market? I can't imagine any market driven more by psychology than the current one, nor one with as many non-professionals participating in it.

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