(Yicai) Aug. 13 -- Shanghai’s benchmark stock index closed at its highest point in almost four years today, following a more than 18-month runup, with analysts expecting further gains.

The Shanghai Composite Index, which tracks all of the stocks listed on the Shanghai Stock Exchange, rose 0.5 percent to end at 3,683.46, the most since reaching 3,678 in December 2021. The index could climb toward 3,800, analysts predict.

The stock market is in a liquidity-driven bull run similar to the one in the second half of 2014, when it grew quickly and enjoyed a steady stream of friendly policies, said Fan Jituo, a strategy analyst at Cinda Securities. The market is likely to rise further and allocations to sectors with strong upside potential and sound rationales should be increased, he added.

The Shenzhen Component Index ended today 1.8 percent higher at 11,551.36, while Shenzhen’s ChiNext Index jumped 3.6 percent to close at 2,496.5.

Corporate earnings and valuations have been squeezed over the past few years, said Mo Xiaocheng, general manager of private equity fund manager Honreal Fund. Now, policy support, liquidity, and earnings are converging to drive growth, with capital flowing back into core assets with solid fundamentals away from short-term speculative plays.

The market’s near four-year high signals a positive shift in sentiment and greater investor confidence, said Yu Fenghui, a consultant at the Top 100 Hong Kong Listed Companies Research Center.

It reflects the steady pace of China’s economic recovery and the benefits of ongoing capital market reforms, he said, adding that as a barometer of the economy, the market’s performance also reflects the recognition of future growth potential.

Looking ahead, Yu said the Shanghai Composite is likely to maintain this upward trend. Trading volumes are healthy, indicating that funds are continuously flowing into the market, he said. With both domestic and global economic conditions improving and corporate profits expected to improve, valuations have room to grow, Yu added.

He cautioned investors to stay alert to risks such as global market volatility and changes in domestic policies. But as long as underlying fundamentals stay strong and no major shocks hit the market, the Shanghai’s stock benchmark appears well-positioned to reach even higher levels, he noted.

Editor: Kim Taylor