The move to stamp out the practice of siphoning off bank loans for stock market speculation is set to have a positive impact in the long run and help financial stability, say analysts.

Liu Mingkang, chairman of the China Banking Regulatory Commission, said his agency had evidence of "relatively serious" misuse of bank loans for stock market speculation and would crack down on such irregularities.

Liu said this on the sidelines of the annual session of the National People's Congress, confirming a long-circulated market rumor.

The regulator issued a directive in January, reminding banks and financial institutions of the hazards of their association with securities brokerages and ordering them to investigate the problem of misuse of banks loans.

China's stock market, which reversed its five-year slump and gained more than 130 percent last year, is still going strong this year. The climbing index has lured a growing number of investors into the market.

A record 700,000 new stock and fund accounts were opened in the first week after the week-long Lunar New Year festival break, according to figures from the China Securities Depository and Clearing Corporation Limited.

The total number of stock accounts had reached an all-time high of 83.57 million by March 2, it said.

But at the same time, many individuals and institutions have turned to bank loans to invest in the stock market.

"The number of consumer credit and other credit with no specific stated purpose has increased dramatically and we are scrutinizing the problem," said Fan Wenzhong, deputy director of CBRC's Research Bureau.

Although specific figures are not available, many analysts and market watchers say consumer credit and housing mortgages are easy prey that are often misused in the stock market.

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