Are China’s shares at the cusp of a bull run?

Share holders observe the stock market at a stock exchange corporation on December 17, 2014 in Nantong, Jiangsu province of China.
ChinaFotoPress | Getty Images
Share holders observe the stock market at a stock exchange corporation on December 17, 2014 in Nantong, Jiangsu province of China.

After a more than seven-year mire, China stocks may finally be on the cusp of a long-term bull run, shrugging off an economic slowdown, analysts said.

"Looking back at 2014, China's execution on containing the fallout from credit risks and the physical property market exceeded our expectations," Nomura said in a note Tuesday. "2015 will be an even better year," marking the start of a three-year bull rally.

At the same time, Nomura expects China's gross domestic product (GDP) growth will fall to 6.8 percent, compared with Beijing's and consensus' forecasts for 7 percent as investment growth slows and the property market continues to correct.

Read More China's 2015 outlook in three words

"This three-year rally will be driven by both earnings growth and valuation re-rating, as structural reforms and economic rebalancing yield capacity rationalization, higher operating efficiency and ROE (return on equity) in the corporate sector, private or SOEs (state-owned enterprises), while macro polices contain downside risks," Nomura said.

It forecasts the MSCI China index will trade in a 60-76 range this year, for around 15 percent upside from the end-2014 level to this year's peak. But it also expects volatility, with the year's likely trough likely to mark around 10 percent downside from last year's close. The MSCI China index is currently trading around 65, after falling off its peak around 103 touched in November 2007.

Nomura see that as just the beginning, however, forecasting the MSCI China will rise 60 percent by its peak in 2017 -- or around the 100 level -- amid earnings growth and valuation re-rating. It also expects Hong Kong's HSCEI index could top 19,000 over the same period, from around 11,983 currently.

The Shanghai Composite ended Tuesday up 0.1 percent at 3353.01, after tapping 3394.22 intraday, its highest since 2009, but still well off the peak of around 6000 touched in late 2007.

HSBC is also sticking with a positive call on China.

"The supportive monetary policy regime should continue deep into 2015, helping equities. The market offers attractive valuations and high yields," HSBC said in a note. It also expects rural land reforms to enhance property rights and help to boost incomes and consumption in rural areas.

HSBC also expects the Shanghai-Hong Kong Stock Connect program launched last year will help pave the way for local shares to be included in MSCI's emerging markets index, which would drive passive flows into the market.

Nomura also expects fresh funds to head into China shares -- especially from Chinese households.

Read More Early signs of a floor under China's sinking property market

"Chinese onshore investors are starting to undergo what is a likely major shift in household asset allocation, away from physical property and shadow banking products to A-shares," it said, adding that A-share account registration, which has been rising over the past six months, and the Shanghai A-share index return are highly correlated.

Property assets account for around 70 percent of Chinese household wealth, but property price expectations have dimmed recently, Nomura noted. Plans for a deposit insurance program at banks with a coverage ceiling of 500,000 yuan per bank account may also persuade wealthier households to move some funds into stocks, it said.

Other analysts also expect China's households will step into the market.

"Over 61 percent of Chinese households have bank deposits, but only 6.5 percent of households have invested in the stock market," Julius Baer said in a note Tuesday. "In China, both households and foreign investors are significantly underweight stocks."

—By CNBC.Com's Leslie Shaffer; Follow her on Twitter @LeslieShaffer1