Not a bull market yet

China's A-share market has maintained strong rising momentum in the past five trading days. The benchmark Shanghai Composite Index is up by 200 points, or about 10 percent, from its low of 1,991 in late May. Some commentators who used to short the market now suggest investors start to buy.

Will the win streak continue and is another bull market coming?

The fundamentals of the Chinese economy are improving. The HSBC Purchasing Managers' Index hit an 18-month high this month after jumping to 52 from 50.7 in June. Industrial output increased 8.8 percent in the first half, compared with 8.7 percent for the first quarter. Last month it grew 9.2 percent, the fastest pace this year.

On the retail front, sales expanded by 12.1 percent in the first half, compared with 12 percent in the first quarter.

The latest data shows that China's industrial enterprises saw their profits soar by 17.9 percent in June year-on-year, 9 percentage points higher than May. For the first half profits were up 11.4 percent, 1.6 percentage points higher than the January-May period.

That data shows China's economic growth is picking up and could be back on track after a slew of small-scale stimulus measures begin to take effect.

Economists said if such a trend continues growth could continue to strengthen in the third quarter. Recent surges in stock indexes capture the optimistic mood toward China's prospects in the third quarter. While China's fundamentals could continue to improve in the third quarter, we must bear in mind that it is the mini-stimulus measures that have played a crucial role in stabilizing the economy. How it would fare without the support of such policies remains questionable.

China's troublesome real estate sector is the biggest headache. As it continues to cool, it will drag down growth of related sectors which will in turn combine to create downside pressure.

Although many local governments are lifting controls on home purchases, the market remains sluggish. If potential buyers continue to hesitate, it will need central authorities to launch more stimulus programs to bolster the sector and overall growth.

The question is: Will policymakers take the risk of postponing reform and restructuring the agenda to launch a larger-scale stimulus program?

The possibility of policymakers taking bolder moves to stimulate the economy looks small. If they fail to do that, prospects will look uncertain. It remains conditional that China's fundamentals will continue to improve in the coming quarters.

Internationally, the US Federal Reserve is tapering its quantitative easing programs. When it is completed in October the market will anticipate interest rate hikes from the US policymakers, which will drain capital from emerging market economies, including China.

Geopolitical concerns over conflicts in Ukraine and Gaza may continue to weigh on investor mood and for domestic investors it is too early to conclude that a bull trend has started.