China Stock Skepticism Gets Louder as World-Beating Run Extends

Invesco Ltd., JPMorgan Asset Management, HSBC Global Private Banking and Wealth, and Nomura Holdings Inc. are among those viewing the recent rebound with skepticism and waiting for Beijing to back up its stimulus pledges with real money. Some are also concerned many stocks are already reaching overvalued levels.

Chinese shares have skyrocketed since late-September as a barrage of economic, financial and market-support measures reinvigorated investor confidence. The Hang Seng China Enterprises Index, which comprises Chinese stocks listed in Hong Kong, has jumped more than 30% over the past month, making it the best performer among more than 90 global equity gauges tracked by Bloomberg.

“In the short term, sentiment could overshoot but people will go back to fundamentals,” said Raymond Ma, Invesco’s chief investment officer for Hong Kong and Mainland China. “Because of this rally, some stocks have become really overvalued” and they lack a clear value proposition based on their likely earnings performance, he said.

Stimulus announced by Beijing has included interest-rate cuts, freeing-up of cash at banks, billions of dollars of liquidity support for stocks, and a vow to end the long-term slide in property prices. While there’s plenty of optimism that could underpin a sustainable equity rally, there have been a number of false dawns before, most recently a rally in February that completely unwound.