A survey by a Chinese state-owned investor protection fund showed that investors may be regaining their confidence in the country's turbulent equity markets. Analysts abroad are less upbeat.
The latest monthly survey by China Securities Investor Protection Funds (SIPF) climbed to 51.3 in September, up 24.2 percentage points from August, underscoring rising optimism among Chinese investors.
China's stock market boom turned to bust four months ago, sending the benchmark Shanghai Composite index tumbling almost 40 percent from its June 12 peak as investors scurried for the exit.
Beijing has since unleashed an array of unprecedented measures including a freeze on initial public offerings (IPOs), direct share purchases by state entities, considerations of a market-wide 'circuit breaker' mechanism and the drafting of new rules for commodity exchanges.
In recent months, authorities have also intensified its market probe on alleged market manipulation, issuing penalties to stock trading platforms, as well as netting a senior official at the securities regulator, journalists and social media users.
The efforts to bolster market confidence seems to be working, according to the survey.
The survey found that 28.2 percent of respondents see the Shanghai Composite on an uptrend in the fourth quarter, while 38.9 percent expect the index to be flat over the final three months of 2015. That compares with 20 percent of investors who predict further losses in equities. The remaining said they were unsure.
Meanwhile, slightly more than half of the respondents polled by SIPF plan to maintain their stock fund allocations, while 12.3 percent of investors plan to increase their allocation to stocks.
In addition, the state-owned fund said on Thursday there was a net inflow of 68.4 billion ($10.78 billion) into Chinese investors' securities accounts last week, breaking five consecutive weeks of outflows. The inflows indicate improving investor sentiment toward Chinese stocks, according to SIPF.
The survey results come on the back of comments from a senior central banker that the country's market correction is "almost over."
Yi Gang, deputy governor of the People's Bank of China (PBOC), told an annual meeting of the International Monetary Fund (IMF) in Peru that China's stock market has experienced several rounds of corrections which have had limited direct impact on China's economy, the official China Securities Journal reported on October 12.
However, market watchers seem to be singing a different tune.
"I would argue that such investor confidence survey is not a leading indicator of A-shares. It is at best a coincident, if not lagging, indicator," Daniel So, strategist at CMB International Securities, told CNBC in an email interview.
The Hong Kong-based strategist argues that retail investors in China, who often display a herd mentality, place little emphasis on fundamentals and valuations. With mainland equities stabilizing modestly last month, "it is no surprise that investor confidence also rebounded," So added.
"I expect such investor confidence, based little on fundamentals, would fluctuate along with stock prices," he said.
Japan's biggest brokerage Nomura agrees: "Investors' current conviction in Chinese equities is low [with the market having] just recovered in September from crisis mode in July and August."
Analysts still see jitters prevailing in the near term amid uncertainties over when the Fed will lift interest rates from near zero and the state of the world's second-biggest economy, a Nomura report dated October 5 said.
Official statistics released on Wednesday showed cooling inflation in the mainland, with the consumer price index (CPI) gaining 1.6 percent on-year in September, missing Reuters' expectations for a 1.8 percent rise. The producer price index (PPI) fell 5.9 percent, meeting expectations but remaining in deflationary territory for the 43rd straight month.
September trade numbers announced on Tuesday similarly painted a worrying picture. China's dollar-denominated imports plunged 20.4 percent to chalk up the 11th consecutive month of decline, while exports fell 3.7 percent from a year earlier.
In addition, market watchers also noticed Chinese investors making a beeline for safe-haven bonds in recent months.
Yields on five-year Chinese government bonds touched 2.927 percent on Wednesday, down from 3.47 percent in early April. More than half of that decline occurred since late August, Reuters data showed.
Meanwhile, gross bond issuance amounted to 12.6 trillion yuan ($2 trillion) in the first eight months of 2015, rising 63 percent on-year during the same period, the FT reported on October 13.
"Stocks are still stuck in a mean reversion process," said Bank of Communications International's chief strategist Hao Hong, referring to a tendency of security prices to return to their averages. While the technical rebound in Chinese equities could entice some investors, it will likely be temporary without support from market fundamentals and valuations, he said.
"In a slowing environment with no obvious inflation pressure, bonds are a more obvious choice than stocks. Demand for bonds will likely pick up in the fourth quarter due to still cautious market sentiment and the search for yields," Hong added.