Stocks face correction, warns BofA

Bloomberg and staff reporter

China's stock rally may face a "meaningful correction soon" given its similarities with the 2015 boom and bust cycle, according to BofA Securities.

The Hang Seng China Enterprises Index and the MSCI China Index have both surged at least 30 percent from mid-January lows, akin to the pace of gains seen in 2015 before the market plummeted, it said

Having peaked in May 2015, the HSCEI gauge tumbled nearly 50 percent through February the following year and is yet to scale that high.

BofA said long-only investors on the mainland are getting nervous as they worry about a lack of improvement in jobs, deflation, and credit demand while the impact from geopolitical tensions has been overlooked. Some investors also see bubbles emerging in some tech areas, it said.

Stocks in both China and Hong Kong remained largely unchanged yesterday.