BEIJING, April 30 -- Chinese stocks closed lower on Thursday, the last trading day of April, indicating cautious market optimism after a continued rally.

The benchmark Shanghai Composite Index grew over 13 percent in the first quarter (Q1) this year from about 3,200 points to almost 4,500. Trading has been so active that the combined turnover for the Shanghai and Shenzhen bourses hit a record 1.8 trillion yuan (294.42 billion U.S. dollars) on April 20, with the former reaching an all time high of 1.1476 trillion yuan: The display at the bourse was not designed to even display a numerical value that high.

Chinese new stock accounts rose by 433 percent year on year in Q1 to reach almost eight million.

Last week, a record-high 4.13 million Chinese applied for new accounts, up 26.81 percent week on week. Now about one thirteenth of Chinese play the stock market.

About 62 percent of the new investors are in their late twenties or early thirties, according to the China Securities Regulatory Commission (CSRC).

Analysts believe that the stock market boom echoes expectations of reform measures, and warned against possible risks of violent fluctuations due to over leveraging.

BULLISH ABOUT REFORM

The Shanghai Composite Index has grown over 40 percent since early March, after detailed reform blueprints for the year were outlined at the annual parliamentary sessions.

Analysts believe that instead of being directly linked to economic growth speed, the bull market is a result of multiple factors including funds, confidence and policies.

"The accelerating growth pace is the outcome of investors' keen expectations for more detailed and bold reforms steps this year, such as reform of state-owned enterprises, the Belt and Road Initiative and financial reforms," said Yang Delong, chief analyst with China Southern Fund.

Meanwhile, continued market liquidity injection through reserve requirement ratio and interest rate cuts also saw more capital channeled into the stock market as the property market, burdened by overcapacity, loses its appeal, said Gao Shanwen, chief economist with Anxin Securities.

Gao pointed out that policies promoting public innovation and entrepreneurship have fuelled the surge of small caps stocks.

The ChiNext Index, the Nasdaq-style board that tracks growth enterprises, has soared over 70 percent this year.

CAUTIOUSLY OPTIMISTIC

This rush to invest has raised the concerns of the government, and many analysts have said that a slower and steady market rally would benefit everyone.

Shares in CSR Corp. and China CNR Corp., China's major bullet train makers and two of the biggest success stories of SOE reform, have surged over 400 percent since January. However, investors were caught by surprise when the share prices dropped last week by over 20 percent in the space of two days.

"This should teach investors that volatility is the nature of the stock market and one should be always aware of potential risks," said Li Daxiao, chief economist with Yingda Securities, adding that the price- earning ratio of many listed companies, especially those on the ChiNext Index, was irrationally high.

Most security traders expect the strong market to continue to rise to a record new high surpassing the peak of 6,124 points in 2007, but also warned of short-term fluctuations along the bullish run.

The CSTC put a notice on its website on Tuesday to warn investors to be cautious with trading, and several security traders have adjusted their marginal buying policies to avoid possible risks.

Regulation passed this month allows fund managers to lend shares for short-selling after mainland markets close, it also increased the number of stocks investors can short sell: This is likely to result in more market volatile

"The bubble is there and it is growing bigger. You are gambling if you simply ignore the fundamentals of the economy and public companies," Li said.