INVESTORS hoping for even more gains from Chinese equities have reasons to stay optimistic.

Even after a 30 percent surge in the Shanghai Composite Index this year, stimulus from the government is keeping the bulls going. Authorities will support fundraising of the nation’s small and medium-sized companies via more channels including capital markets.

That came after last week’s improving factory activity gave investors confidence that the measures are working, as well as growing optimism on the trade front.

“I think it’s just the beginning” of China’s stock rally, said Banny Lam, head of research at CEB International Investment Corp. “The market right now wants to see the effectiveness of stimulus measures. PMI figures in March actually showed domestic demand is very strong, boosted by that stimulus. All these things are just a start.”

On trade, Larry Kudlow, the top economic adviser to U.S. President Donald Trump, said the United States and China are “closer and closer” to a deal, and top officials will continue talks this week via teleconference.

Kudlow expressed “guarded optimism, maybe more than guarded optimism” in a Sunday appearance on CBS’s “Face the Nation,” after Xinhua also reported progress during the discussions in Washington that ended Friday.

While Chinese shares are still about 9 percent away from last year’s high — unlike the S&P 500 Index, which Friday came within striking distance of its peak from September — they are the world’s best performers this year. The CSI 300 Index of the top stocks in Shanghai and Shenzhen is up even more this year, gaining 34 percent.

“The proactive stance is paying off, which bodes well for Chinese assets, as well as emerging markets more broadly,” Patrick Zweifel, chief economist with Pictet Asset Management, wrote in a report this month.

Zweifel estimates China’s accelerated reforms and stimulus measures, including tax cuts, infrastructure spending and monetary easing, are worth some 2.8 trillion yuan (US$417 billion), with about a third of that filtering through to the economic expansion.

That said, some investors are on alert for signs the market is overextended. “We will watch for potential sentiment overshooting as the market now trades closer to our target price,” Morgan Stanley equity strategists led by Laura Wang wrote in an April 7 note. (SD-Agencies)