By comparison, "Hong Kong-listed China shares are not at all expensive," she said, adding that they are still "massively under-owned" by global asset allocators.
She sees attractive investment opportunities in selected H-share banks, property developers, new energy and small-and medium-sized companies.
Zhu expects the impending Shenzhen-Hong Kong Stock connect, which is expected in the second half of this year, to be a potential catalyst for the market.
"We would expect to see more [mainland] domestic liquidity flow into the Hong Kong market , " she said.
Liquidity is likely to flow into areas where the valuation gaps are largest, she said, pointing to the H-share small and mid-cap space.
Read MoreShenzhen stocks next 'short of a lifetime': Bill Gross
Hong Kong stocks have risen 15 percent so far this year, lagging their mainland peers by a mile. Shanghai and Shenzhen stocks have rallied 57 and 110 percent respectively over the same period.
Zhu is one of many strategists to have sounded a word of caution on China's runaway stock market in recent days.
"First, it's a hugely retail driven market. Second, it's driven by liquidity and primarily by margin calls. That is a vicious mixture," Andrew Freris, CEO of Ecognosis Advisory said.
Official margin financing balance through brokers currently stands at around 2 trillion yuan, accounting for 12 percent of the free float market capitalization of marginable stocks, according to Goldman Sachs, the highest in the history of equity markets globally.
"Yes, the market can keep going higher above the 5,000 level, but how can you time the market in order to get out in time? The answer is: you can't," he said, referring to the Shanghai Composite, which on Friday rose above the 5,000 level for the first time in seven years .
Read MoreChina stocks nearly a quarter overvalued: Credit Suisse
Not all experts, however, are apprehensive about the outlook for the market.
Goldman Sachs in a report on Tuesday said local institutional investors that it met with in Beijing and Shanghai last week were "universally positive on domestic equities."
Optimism of domestic investors was driven by a few factors including "ample room for policy easing", "strong reallocation to equities from other asset classes" and "noticeable progress on economic rebalancing."
"Some fund managers suggested that strong fund inflows leave them with no choice but to stay engaged," Goldman Sachs added.