After crash, investors resume affair with China equities

Investors appear to have regained their love for Chinese equities judging by the 15 percent rise in its benchmark index since the bruising 30 percent single day crash barely two weeks ago.

Experts attribute the renewed strength partly to the suspension of trading in many stocks and restrictions on the sale of shares in others, imposed by the authorities following the crash. And yet, there seems to be plenty of willing buyers despite concerns about the health of China's economy.

"We met over 15-20 investors and we were stunned and shocked that the love affair with China still continues," Gautam Trivedi, Managing Director of Religare Capital told CNBC-TV18 in an interview.

"In spite of the 30 percent correction and in spite of the fact that as many as 60 percent of the companies were suspended, foreign investors continue to like China and they like India but they like China more," he said.

So what is prompting equity investors to resume purchases amid concerns of a slowdown in the economy?

"Though we have seen the best years of China's GDP growth already, China will continue to grow faster than the developed economies," Ron Schramm, author of The Chinese Macroeconomy and Financial System, said in an interview to Forbes.

"Economic theory suggests more value creating opportunities should support long-run returns in the stock market in the coming decade," he said.

During the course of its rise over the last year, Chinese regulators chose to ignore apparent warning signals, and encouraged investors to do the same. When prices first started to fall, authorities tried to stem the slide.

While reckless margin lending was a major contributor to the eventual crash, other measures such as lowering of interest rates and bank reserve requirements and encouraging brokerages to form a USD 19 billion fund to keep the fundamentally not-so-strong market going, too aided the collapse.

Last week market guru Marc Faber told CNBC he wouldn't touch Chinese stocks even after their steep decline, and instead preferred Vietnam equities, Hong Kong-listed Macau gaming stocks and gold mining shares.

According to Faber, China's growth has slowed down and is unlikely to hit 6-7 percent that many expect.

"Maybe that will be published by the government but the reality is that Chinese growth has slowed down to trickle," he told CNBC.