In the smoke-filled offices of Tiantong Securities in Beijing, hundreds of stock market investors gaze at screens and call up graphs to track the performance of shares on the Shanghai stock exchange.

“It’s down a little today but that’s not surprising after it hit 4,000 points this week,” says one, a Mr Ju, who is unemployed and spends his days keeping a close eye on his investments. Before the morning is out he has made a sale and has printed out the latest update of his portfolio. He says that his position is still in loss after nine years of trading that included a prolonged bear run.

Others are not so reluctant to admit making a profit. Yuan Wenqin is a former postal worker from central Anhui province who says that his portfolio is doing quite well. Ma Xianfa is a retired civil engineer of 70 who says that she diverts a portion of her savings to her stock market investments and has made a 30 per cent profit.

Mr Yuan scoffs at reports that the Government is worried that overeager punters are borrowing against their homes to join the rush into shares: “Only an idiot would do that. It’s far too risky. You hear that some people do that, but they are only a minority. Most of us invest our savings.”

One redeyed punter who looks as if he’s barely slept, sits down in front of a screen, calls up a graph and shouts angrily: “Huh. You think this is about making money? I’ve lost 200,000.”

Yet the momentum appears to be almost unstoppable. The Shanghai index took barely two months to make the leap from 3,000 points to 4,000 points, breaching that barrier for the first time this week. Stephen Green, senior economist at Standard Chartered in Shanghai, believes that it is possible for the composite index to hit 5,000 within a month. The Shanghai composite index (SSEC) rose to a record closing high of 4,049.701 points on Thursday, leaving it up 51 per cent this year and up 249 per cent from the start of 2006. It closed on Friday at 4,021, down 0.69 per cent.

Many analysts do not see the market as a whole as prohibitively expensive. The average price-earnings ratio for domestically traded A shares on the Shanghai stock exchange is 42 times 2006 earnings, far above levels under 20 for some big markets around the world but below levels near 60 in China’s bull market early this decade. Corporate earnings growth is expected to slow to about 25 to 30 per cent in the second half of this year from its blistering pace in the first quarter, when profits doubled – but that pace of growth should still help to justify current valuations.

Mr Green says that China’s rapid macroeconomic growth, huge liquidity and a lack of investment alternatives are factors behind these valuations. Most savings are held in low-yielding bank deposits Mary Ma is typical of the new investor. The 27-year-old financial industry worker opened a trading account yesterday at Tiantong Securities. She plans to invest about 100,000 yuan (£6,650). She has already bought herself a flat, her friends and colleagues are all in the market and she has the ready cash to take a punt herself.

Chinese investors are opening hundreds of thousands of new accounts every day. More than a million accounts were opened on April 30 alone, according to Goldman Sachs. Such is the craze that almost every conversation swings to the stock market at some point. Even the national anthem, March of the Volunteers, has been caught up by pranksters, who circulated a text message replacing its patriotic lyrics with appeals to invest in the stock market. “The Chinese nation is at its most crazy hour, all let out the cry to buy! . . . Cherish the dream of overnight wealth. March on! March on!" the text message read.

Mrs Ma said: “Why put your money in the bank, where interest rates are so low? You get nothing. Much better to invest in stocks.” The bench-mark one-year deposit rate is at 2.79 per cent, far from matching stocks’ potential returns, and that is before tax and inflation.

Mrs Ma does not dismiss fears of a crash. She is careful to keep only a portion of her capital in the markets. “I listen to the experts on television and while they aren’t always right, I’m careful to make sure I see lots of analysis.”

Mrs Ma may be sanguine, but some analysts are anxious. Goldman Sachs said: “A-share valuations could soon advance into clearly unsustainable territory.” It urged the Government to act quickly to prevent the market from overheating, to avoid a crash that could slash the savings of millions of households and set back economic reforms.

So far, Chinese authorities have done little to reduce this risk. One reason may be the approach of this autumn’s five-yearly Communist Party Congress, for which leaders may be preparing to present a booming stock market as an achievement.

Yet there have been signs in recent weeks that the authorities may want the market to slow. Zhou Xiaochuan, Governor of the central bank, said last weekend he was concerned by a stock market bubble and would monitor asset prices as well as inflation.

Mr Yuan’s approach is more thought-out than that of the many, young and old, who spend their days in Tiantong Securities watching their shares rise and fall. He usually sells most of his investments in a company once he sees a good profit, and then revinvests. “I’m in this for the long term. There’s too much capital floating around in China . . . There’s a huge amount of potential. You can’t expect to find a pot of gold in a day. It’s gradual.”

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