BofA warns of an early correction in Chinese stocks - a repeat of 2015?

China's stock market could face a "significant correction in the near term", warn analysts at BofA Securities. The similarity to the sharp rise and subsequent fall in 2015 suggests a potential risk for investors.

According to strategists led by Winnie Wu, the Hang Seng China Enterprises Index (HSCEI) and the MSCI China Index have risen by more than 30% since mid-January, a growth rate similar to 2015, when the market subsequently experienced a drastic decline. The HSCEI index peaked then in May 2015, but had lost almost 50% of its value by February the following year and has not yet reached the highs of that time.

"There are quite fundamental similarities between the current cycle and the situation a decade ago, including the economic transition and the political cycle," the analysts said. "However, growth driven only by expansion can be vulnerable."

BofA $BAC's cautious approach contrasts with the wave of optimism that has swept Chinese markets this year. DeepSeek's technological…