CHINA’S stocks yesterday climbed to near five-year highs on the last trading day of the year, as the stock market ended 2014 up more than 50 percent, the best annual performance by a major global stock market in 2014 after years spent in the basement.

    “This year was a bit unexpected,” Tian Weidong, chief director of research department at Kaiyuan Securities in Xi’an, said yesterday. “I think it took most people by surprise as they didn’t realize this sort of market was possible.”

    The benchmark Shanghai Composite Index gained 2.18 percent to 3,234.68 points, up 52.9 percent year to date. The CSI300 index of the largest listed companies in Shanghai and Shenzhen rose 2.20 percent to 3,533.71 to end up 51.7 percent for the year.

    Almost all of China’s rise came in the last couple of months, as hopes for more aggressive policy stimulus to counter its economic slowdown boosted banks and brokerages.

    The rise is a major accomplishment for the government, as it has successfully convinced many investors to stop speculating on real estate and diversify into shares in companies.

    But the rally’s sustainability is in question, given that it has been almost entirely inspired by policy changes. The market was bolstered by optimism over monetary easing and rallied strongly after interest rates were cut in late November.

    Analysts are calling for another bull year in 2015, but that must be balanced against predictions that the Chinese economy is predicted to slow further, damaging earnings at some of the very blue-chip banks that have led the rally.

    In fact, a poll of Chinese fund managers showed them reducing their equity allocation in the next three months.

    The Hang Seng index added 0.4 percent to close at 23,605.04 points in a shortened trading day, up 1.3 for the year, the widest performance disconnect versus mainland markets since 2007.

    The contradiction is highlighted in the index measuring price differences between dual-listed companies in Shanghai and Hong Kong, which stood at 127.76, indicating Shanghai shares are pricing at a major premium.

    That difference was supposed to be erased by the launch of the Shanghai-Hong Kong stock connect, but the connector has seen extremely weak take-up by both foreign and Chinese investors. (SD-Agencies)