China’s economy is buckling under the weight of tariffs and a deep-rooted property crisis, yet stocks are extending their bull run — a disconnect that’s stirring doubts on the rally’s staying power.
In just the past month, onshore stocks have added almost a trillion dollars to their market value, the Shanghai Composite Index has hit a decade-high and the CSI 300 Index has taken its advance from this year’s low to more than 20%. That’s when nearly every recent economic indicator — from consumption trends, home prices to inflation — has brought red flags for investors.
The rally has been driven by cash-rich investors shifting into stocks amid a lack of alternatives. While the market’s steady advance may suggest less risk of a sudden correction, some analysts are warning that a bubble is in the making. Nomura Holdings is cautioning against “irrational exuberance,” while TS Lombard is calling the mismatch a standoff between “market bulls and macro bears.”