A more than 14% rally by China A shares during the first week or so of July left some observers asking whether a replay of the manic bull run the mainland experienced five years ago could be in store.
But a lot has changed since that dramatic runup which saw Shanghai and Shenzhen's composite stock market indexes more than double in less than a year, making another retail-driven, margin lending-fueled rally with an unhappy ending less likely, market participants say.
In the interim, access for foreign investors to mainland-listed A shares has improved considerably and an initial 3% to 4% of the Shanghai and Shenzhen markets have been added to leading benchmark indexes — with further additions likely in coming years.
Meanwhile, China's regulators continue to give domestic institutional investors, like insurers, ever greater leeway to allocate their fast-growing pools of capital to equities — creating a growing, if still small institutional counterweight to retail investors that account for well over 80% of overall market activity.
Another key difference is the continued development of the broader equity market, including progress in building out a derivatives market on the mainland investors can use to hedge their exposures, said Paul Sandhu, BNP Paribas Asset Management's Hong Kong-based head of multiasset quant solutions and client advisory.
However for a number of analysts, the biggest change from five years before is the heightened vigilance of China's powerful regulators, which were forced to scramble in 2015 as the market peaked on June 12 and then plunged more than 40% over the 10 weeks that followed.
"Policymakers' attitude toward the stock market" is a key difference relative to 2015, said Kinger Lau, Hong Kong-based managing director and chief China equity strategist with Goldman Sachs & Co.
"They are arguably more ahead of the curve this time around in terms of containing speculation and are more vigilant about risk management, which means that the dramatic boom/bust episode of 2015 is less likely to repeat, at least from a policy/expectation management standpoint," Mr. Lau said.
In a July 7 "China Musings" report on the prospects of a "summer melt-up" for the A-shares market, Mr. Lau and his Goldman Sachs colleagues made the case for just another 15% upside for mainland stocks over the next three months. On the back of lower earnings growth estimates for the coming year, the report predicted most of that final advance would evaporate by June 2021.