Some investors expect further gains in Chinese stocks. At 15.6 times earnings, the Shanghai Composite trades at the lowest multiple after Hong Kong among the world’s 10 biggest stock markets. The MSCI China Index, which tracks Chinese companies traded in Hong Kong, is valued at 10 times earnings. The central bank’s move this month to cut the the amount of cash lenders must set aside as reserves may also boost stocks.

“It’s cheap and I think earnings should be OK now that you have lower input costs and lower company fundings because of the lower interest rates and also the lower required reserve,” said Daphne Roth, the Singapore-based head of Asian equity research at ABN Amro Private Banking, which oversees about $220 billion. “That’ll pump in some liquidity back into the system.”

Others are less sanguine. Andy Xie, a former World Bank economist, said the the Chinese rally may be short-lived. He said the surge in IPOs in China could “overwhelm” demand from investors.

Private Equity

“There are thousands of companies that private equity firms have invested in that are ready to come into the market,” Xie said. “It’s not like a little bit of oversupply. There’s a tsunami of IPOs coming.”

There are also risks betting on IPOs and the growth outlook for these new companies.

“People tend to believe that new stocks should perform better than the existing stocks, but this is not necessarily true,” said Jing Ulrich, vice chairman of Asia Pacific at JPMorgan Chase & Co. “Smaller companies may grow faster, but they may also be riskier and more volatile due to their shorter track record and lower coverage by the brokerage community.”

That hasn’t stopped some of China’s wealthiest moguls from joining in the recent IPO frenzy. Wang Jianlin, the country’s second-richest person, listed his cinema business last month on the Shenzhen Exchange to raise money. Wanda Cinema Line Co., China’s biggest owner of movie screens, surged by the daily limit for more than two weeks after it started trading, adding $3.8 billion to Wang’s $28.9 billion fortune.

‘Better Valuation’

“We could have priced Wanda Cinema a lot higher if not for regulatory limits,” Wang, 60, said in an interview late last year. “We chose an A-share listing because you get a much better valuation in China,” the billionaire said, referring to yuan-denominated stocks traded on mainland exchanges.