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Another false dawn for Chinese stocks?

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While Chinese equity markets have rallied on the country's landmark reform agenda, skepticism is setting in over how long the party in stocks will last.

"Although we are impressed by the wide-ranging statement of intentions, we are not convinced that there will be a sharp upward trend in stock prices," Jessica Hinds, economist at Capital Economics wrote in a report on Tuesday.

(Read more: Chinaunveils boldest reforms in decades)

"Granted, concerns about a structural slowdown in economic growth have been a key reason for the poor performance of China's stock market. Yet even if the reform package is fully implemented, it is unlikely to prevent growth from slowing to around 6.5 percent in 2015 and staying at a similar level in the years that follow," she said.

Euphoria over the reform plan unveiled on Friday faded by Tuesday, with the benchmark slipping 0.2 percent and Hong Kong's Hang Seng up 0.1 percent.

The 60-point reform plan is seen paving the way for sweeping changes in the world's second-biggest economy as it tries to steer away from investment-led growth to a consumption-driven economy.

Hinds said reforms, which include granting markets a more "decisive" role in resource allocation, could in fact have an adverse impact on stocks. The Shanghai market is dominated by large, state-owned enterprises, many of which have benefited from subsidies and state control of resource pricing.

"Granting markets a more 'decisive' role in resource allocation could result in these firms initially being less profitable, even if increased competition would ultimately be beneficial," she said.

(Read more: China pledges 'decisive' role for markets in reform push)

Diana Choyleva, head of macroeconomic research at Lombard Street Research agrees that now is not the time to pile into Chinese equities.

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"The market has pushed Chinese equity prices and the yuan up, but such optimism is likely to be quashed in coming months. Financial market reform is set to bring economic and financial turbulence over the next couple of years," Choyleva said.

"China should have made these reforms when the going was good... But instead it allowed the excesses in its economy already evident in 2004 to explode even further. It now needs 'creative destruction'. And before it gets to the 'creative' part it has to go through the 'destruction' part," she added.

Higher interest rates and corporate profit destruction are set to be the mechanism which will clear the investment excesses of the past, said Choyleva. Lending rates, which were liberalized earlier this year, have been climbing in the recent months.

(Read more: China's reforms: 5 key ones you should know)

Mainland corporate profits have already been under pressure due to rising labor costs and weakening export growth.

"Corporate profits will continue to suffer as next firms adjust to the scarcity and higher cost of capital as well," she said.

"How prepared the leadership is to deal with weak growth and financial distress over the next couple of years is difficult to foresee," she added.