Scepticism over Chinese stocks remains despite world-beating rally

Global fund managers waiting for Beijing to back up stimulus pledges with real money

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HONG KONG - The world-beating rally in Chinese stocks is failing to convince many global fund managers and strategists.

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

Chinese shares have skyrocketed since late September on a barrage of economic, financial and market support measures. The Hang Seng China Enterprises Index, which comprises Chinese stocks listed in Hong Kong, has jumped more than 30 per cent 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 Mr Raymond Ma, Invesco's chief investment officer for Hong Kong and mainland China.

Due to this rally, some stocks have become "really overvalued" and they lack a clear value proposition based on their likely earnings performance, he added.

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 longterm slide in property prices.

While there is 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.