Financial markets rally as economic confidence grows: Report

China's financial markets have rallied as confidence builds that the country's economy is shaking off the coronavirus pandemic, according to a WSJ report last Thursday.

That optimism has spurred Chinese mainland stocks to multiyear highs in recent days, with the Shanghai Composite rising 16.5 percent over eight straight sessions of gains through last Thursday, which were partly fueled by optimism among China's millions of individual investors, the report said.

Stock-market gains are occurring against a brightening economic backdrop, and the upcoming second-quarter GDP data will show a V-shaped recovery in China's economic growth, forecasted by economists.

Even so, China calls for a healthy and prosperous stock market in a proper manner, and investors are urged to manage risks, respect the market and invest rationally and for the long term, according to WSJ, citing a report from China Securities Journal.

Local investors are not the only ones attracted by Chinese mainland stocks. Foreign investors bought a net 55 billion yuan ($7.9 billion) of the stocks in the first five trading days of this month through the Stock Connect trading link in Hong Kong, which was more than all net purchases last month, the WSJ report said, citing Wind data.

Also, a raft of recent survey data showed economic activity gathering momentum, suggesting China's uncompromising approach to tackling the coronavirus pandemic is starting to pay dividends.

The wealth effect of surging stocks could encourage more consumer spending, helping to underpin the economic recovery, Tai Hui, chief market strategist for Asia at JP Morgan Asset Management, said in WSJ's report.

Despite the recent run-up, investors and analysts played down concern of a bubble. Though the officially sanctioned margin loans have topped 1.3 trillion yuan, the highest in almost five years, that still is not much more than half the 2015 peak of 2.3 trillion yuan, the report said, citing Wind data. The Shanghai Composite's valuation, at about 15.4 times historical earnings, is also considerably lower than its 2015 peak.