Shanghai - Su Qiaozhen is a typical busy white-collar professional in Shanghai. She earns a decent salary and recently she has made a tidy 50 percent return on her investment in China's booming stock market.

Su, 50, who makes 8,000 yuan (US$1,000) a month as a manager in a property development company, last year jumped into the action by ploughing 500,000 yuan, her life savings, into equity funds.

She is one of an estimated 70 million investors who have helped push Chinese share prices up about 130 percent since January last year, withdrawing record amounts from more than two trillion dollars in national household savings.

"I thought it was better to hand over to the fund manager since I don't have much time or knowledge about the markets," Su said.

Su was pleased with her funds' performance but is also nervous about voices, still in the minority, warning the stock market's valuation has run well ahead of itself and could be in for a major correction.

"Many analysts still believe the market has potential to increase, but I found there are a few saying it will go down.

"Now I don't know whom to listen to."

Andy Xie, a former economist at Morgan Stanley, is one expert troubled by what he sees as the markets' unrealistic gains and investors being lulled into a false sense of security.

"Chinese people are reading this wrong," Xie said.

"They think that the market is going up because of these mutual funds are doing a great job, but actually it's because they are giving them so much money to the funds and these funds are putting the money into the market.

"Everyone is saying: 'these are professionals, they know what they are doing' but that is not true. Mutual funds' performance is highly correlated with the overall market's performance.

"These mutual funds have created a false sense of security."

According to Peter Alexander, chief of specialist research firm in Shanghai Z-Ben Advisors, investors last year took 155 billion yuan out of bank accounts and invested them in the stocks and equity products.

"This 155 billion yuan is new fresh capital," Alexander said.

"There has been no other time since 2003, and prior to that there were no open-ended mutual funds, where we have seen so much money flow into mutual funds."

The results of the investment bonanza are ballooning valuations in domestic mutual funds that soared 83 percent from 60 billion dollars since January last year to 110 billion dollars at the end of December, according to Z-Ben Advisors.

The total capitalisation of the China bourse is now about one trillion dollars, analysts said, a dramatic turnaround from 18 months ago when at eight year lows the market value dipped below 400 billion dollars.

Daily trading turnover is now running at around nine billion dollars and this week hit an all-time high of 11 billion dollars, a level rivalling Tokyo trading.

China's stock market fever was initially triggered by positive sentiment toward the regulatory overhaul of state-owned shares, but analysts say the unprecedented gains are supported by earnings from the country's production and export machine that has created the world's fourth largest economy.

"The market is being supported by strong fundamentals - strong profit growth, strong export growth and strong liquidity, thanks to all the money that exporters are earning and then depositing at the banks," Stephen Green, a senior economist at Standard Chartered in Shanghai, said.

"On the other hand, this is a two market story: the 100 to 200 companies that are tracking most of the funds, while the majority of small cap stocks are not performing as well," said Green.

"So the clever institutional money is concentrating in a small number of large cap stocks, causing the index to rise more rapidly than the overall market."

The benchmark Shanghai Composite Index hit an historic high Wednesday of 2,825.58 points but slid lower on the week to 2,668.11 as investors booked profits after China Life's soaring trading debut, up 106 percent.

With share prices sliding 3.7 percent Friday, Zhu Haibin, an analyst at Everbright Securities, warned of a more prolonged correction amid concerns that share prices are overvalued.

"There could be more corrections over the next week as the regulators seem a bit worried about current over-optimism among investors," Zhu said.

He pointed to a move by the securities watchdog to restrict issues of new mutual fund products and speed up approvals of share sales as a way of soaking up the froth in market.

Shanghai-based Haitong Securities analyst Zhang Qi also warned of the dangers in a stock market being driven by excess liquidity rather than corporate fundamentals.

"The market performance is based on the direction and scale of the capital flows rather than the companies' profits and return ratios," Zhang said. "The boom in the stock market is not rational."