Taiwan's stock market has surged over 100% in the past year as retail investors borrow heavily to buy shares, raising concerns among economists about an unsustainable bubble.

What happened

Taiwan's benchmark stock index has risen over 100% in the past year, becoming the world's fifth largest market and overtaking the U.K., Canada and India in that timeframe. The rally has been fueled by heavy borrowing at low interest rates, with brokerages hitting internal lending limits and being forced to demand more collateral and raise rates. The borrowing surge was so intense that it disrupted a central bank debt auction on June 3, when insufficient buyers showed up for the first time ever.

What to watch

Teenagers are opening brokerage accounts in large numbers, and trading volumes have spiked so sharply that they've crashed some firms' websites. The intensity of retail participation, combined with heavy leverage, means any market correction could expose a wide swath of unsophisticated investors to significant losses. Investors shut out by brokers are shifting to bank loans instead, deepening systemic exposure.