China stock alarm bells rebuffed as JPMorgan, BlackRock stay upbeat, market barometers remain a distance from 2015 crash triggers

China’s stocks have climbed out of the depths of the Covid-19 crisis to zip past a 13-year high in the early days of the new year. Not surprisingly, some bears have sounded the alarm bells in the US$11.2 trillion market amid some wobbles.

Since the March 23 bottom, more than US$4.5 trillion of market value has been created in a span of nine months, putting the 61 per cent rally under the microscope. The CSI 300 Index surpassed the 2015 high on January 5, taking it to within 8 per cent of the 2007 peak. The initial excitement has given way to worries about a repeat of the US$5 billion meltdown five years ago.

Yet, talks of froth in the domestic A-share market may be premature. JPMorgan Asset Management sees further price upside on the strength of the nation’s economic recovery. While some individual stocks such as Kweichow Moutai and Contemporary Amperex are breaking records, other analysts point to market signals – from valuation to leverage and sentiment barometers – for assurance.

China’s economic rebound is seen as a linchpin to global recovery from the Covid-19 crisis. Growth was 6.5 per cent last quarter, the government said on Monday, quickening from 4.9 per cent in the preceding three months. That could be a catalyst to healthy corporate earnings, JPMorgan Asset’s strategist Sylvia Sheng wrote.