THE breakneck pace of China’s equity rally will decelerate in the coming months, according to strategists who are forecasting the kind of slow bull market that would likely be well received by regulators.

The Shanghai Composite Index will climb to 3,200 — or 3.1 percent from Friday’s close — by the end of June, according to 21 analysts and fund managers surveyed this month. That compares with the 24 percent surge since the start of the year.

Analysts were cautiously optimistic at the close of 2018, and this year’s bull market in major gauges has exceeded expectations. With the rally since October adding more than US$2 trillion in value, China’s world-beating stocks put authorities on the alert to prevent a repeat of the 2015 crash. They’ve warned on gray market leverage and speculative trades while relaxing trading rules, treading a careful line to create a more benign environment for companies to get much-needed financing from the stock market.

“Equity financing is a national strategy and a top priority for the stock market,” said Shi Wenbien, an analyst with Yuanta Securities Co., adding that China wants to lift the weight of equity financing in its total social financing. “The stock market should be the engine for the economy.”

Still, predictions for stocks on an annual basis are pretty optimistic: the median forecast of 19 survey participants sees the Shanghai benchmark rising to 3,500 by year end, which implies a gain of 40 percent from 2018, when the index posted its worst performance in a decade.

Most analysts said stocks will be supported by China’s stimulus policies, including tax cuts, an easier liquidity environment and potential inflows after A shares’ inclusion by foreign index compilers. (SD-Agencies)