(Bloomberg) — The world-beating rally in Chinese stocks is failing to convince many global fund managers and strategists.
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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 and prompted the likes of Goldman Sachs Group Inc. to upgrade the nation’s stocks to overweight.
The Hang Seng China Enterprises (^HSCE) Index, which comprises Chinese stocks listed in Hong Kong, has jumped more than 35% over the past month, making it the best performer among more than 90 global equity gauges tracked by Bloomberg, while raising concern it may be too far, too fast.
“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. The China National Development and Reform Commission will host a press conference Tuesday to discuss implementation of a package of incremental economic policies.
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.
Ma at Invesco, who was one of relatively few China bulls coming into this year, said he’s in no rush to add to his investments now.
“There are a group of stocks whose share prices are up by 30% to 40%…
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