Since March 2016, the Chinese A-share market has experienced a notable upward trend, reclaiming the significant milestone of 3,000 pointsOn March 23, the Shanghai Composite Index opened lower but rallied throughout the day, closing at 3,009.96 points, marking a modest increase of 0.35%. The Shenzhen Component Index also saw a rise, ending the day at 10,442.38 points, up by 0.95%. However, in the wake of these achievements, there has been volatility, with the Shanghai index dipping to 2,989.30 points by the publication deadline, representing a decline of 0.69%. This ongoing tussle for dominance around the 3,000-point barrier raises critical questions: Is a bull market truly on the horizon?

As market sentiment improves, the once-dormant practice of margin financing is stirring back to lifeIn the aftermath of last year’s market fluctuations, a crucial lesson emerged: policies must not yield to public sentiment

Maintaining a level-headed regulatory perspective is essentialFinancial instruments certainly benefit from leveraging; however, this leveraging must remain within reasonable limitsIf leverage exceeds stratospheric bounds, it transitions from being a facilitator of growth to a harbinger of disasterThe more substantial the leverage, the more catastrophic its potential consequencesHence, it appears that the government's strategy may involve controlling investment leverage rates to promote a steady rise in the stock market.

The return to leveraged trading is aligned with investor expectations as well as governmental intentionsIn the eyes of officials, the flourishing of the first-tier housing market following the Lunar New Year was indicative of a 'pass-the-buck' game, with a bubble ready to burst at any momentWithout fresh channels of investment to absorb this capital, there is a real risk of renewed capital outflows, which could further destabilize the Chinese yuan

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As such, stimulating the stock market to harness its wealth-generating potential has become an essential strategy for building market confidence and safeguarding exchange rates.

In recent days, a surge in off-market margin financing has emerged in response to the strengthening A-shares and the rejuvenation of various thematic stocks fueling a notable rise in market activityThe balance of margin trading recently halted its decline and began to riseBetween March 17 and March 23, the margin trading volume witnessed an unprecedented five consecutive days of growthAs of March 23, the total margin financing balance across the two markets stood at 873.51 billion yuan, indicating an increase of 5.339 billion yuan from the previous dayThis figure was bolstered by a rise in Shanghai's financing balance, now at 509.742 billion yuan, up 2.378 billion yuan, and Shenzhen's balance, which reached 363.609 billion yuan, increasing by 2.961 billion yuan.

In addition, the Central Huijin Investment's resumption of transfer financing services and the reduction of annual interest rates on such financing have captured market attention, interpreted widely as a signal encouraging leverage funds to re-enter the market

According to Bohai Securities, this move is favorable for both institutional and individual investors, noticeably lowering financing costs and positively impacting market liquidity, forecasting that margin trading volumes may continue to riseMeanwhile, Zhongtian Securities views these changes as having significant policy guidance implications for prolonging the rebound trend in the marketPresently, sectors in the market are rotating in an organized manner, with a striking recovery in market sentiment and an evident opportunity for continued rallying.

Indeed, since the beginning of 2016, the margin trading environment has remained notably subdued, with instances of sustained sequential increases in margin trading volumes being exceedingly rare, typically occurring just twiceThe most recent example appeared between February 15 and 18, where there were also four consecutive days of increases

However, during this brief early February resurgence, the overall margin balance only increased by 13.1 billion yuan, with an average daily financing purchase volume hovering around 44.2 billion yuan.

As of today, taking the Shanghai index as a reference point, it has rebounded approximately 400 points from the low of 2638, with an impressive total increase of 14.5%. After several days of heightened volatility, the market finally recaptured the 3,000-point threshold on March 21. The prior level of resistance is now evolving into a new level of strong support, suggesting that the market's recovery of this psychological barrier carries significant strategic importance.

Market analysts opine that after navigating recent dramatic fluctuations, the A-share market has gained a valuable reprieve, presently showing signs of conditions conducive to a moderate reboundNevertheless, transitioning from a bearish to a bullish market remains a gradual process, necessitating steady accumulation of favorable market conditions and a restoration of investor confidence.

According to Li Daxiao, the chief economist at Yingda Securities, the A-share market is gradually evolving from its infancy towards a genuine bullish phase, a transformation that is anything but swift.

The stock market should transcend its historical role merely as a tool for financing and investment pools