BEIJING - In many investors' eyes, the Chinese stock market is a mere gambling den where companies make fortunes overnight just by being listed; a situation that can't last indefinitely.

Chinese shares are on a bull run. Temporary or long-term, who knows? There is no doubt, however, that the Shanghai and Shenzhen stock indices have jumped 8.2 and 6.8 percent respectively since the beginning of July.

Come September, and the run continues, with shares in Shanghai rising 1.37 percent to close at 2,266.05 points on Tuesday, a 15-month high. Shenzhen shares climbed 1.29 percent to close at 8,043.31 points.

For individual investors, the market is clearly not plain sailing. Shanghai has been sinking for about five years. In August of 2009 the index was just shy of 3,500 points and has lost about a third of its value since. The ship appeared to be foundering and numerous investors closed their accounts and jumped overboard. The bull run seems to have tempted many to climb back aboard.

From Aug 18 to Aug 22, 170,000 new accounts were opened in the Shanghai and Shenzhen A shares markets, the fourth successive week that new accounts increased. Over and above these new accounts, over 300,000 dormant accounts have been reactivated since the beginning of the year.

Liquidity runs deep

The bull run may be attributable to the great expectations for reform, improving macroeconomic conditions, new capital market rules and the upcoming connection between Shanghai and Hong Kong exchanges.

The Third Plenary Session of the 18th Communist Party of China (CPC) in November last year strengthened confidence in China, said Li Xunlei, chief economist and vice president of Haitong Securities. Measures introduced to restructure the economy and marketplace were exemplified by an overhaul of state-owned enterprises, breaking their monopolies and breeding competition. "The changes have increased the perceived quality of China's economy and driven the stock market up," Li added.

Ample liquidity has also helped. Zeng Gang of the Shanghai exchange, suggests that cutting banks' reserve requirement ratio and focusing on the investment potential of the insurance sector have been two important factors in creating a relatively loose capital market.

Echoing Zeng, Gao Shanwen, chief economist of Essence Securities, credits the recovery of the stock and property markets to rising credit supply in the banking system.

Sea change or ripples on the ocean?

As to whether the current bull run can be sustained, most analysts don't want to commit themselves one way or another.

While maintaining a generally optimistic attitude toward China's stock market, they only expect the "real" bull market to come after "a lot of systemic work."

Gao speaks of the need for a "remarkable improvement in the real economy" and "full implementation" of the decisions made at the Third Plenary Session.

He likened the evolution of China's stock market to a satellite carried into orbit by a three-stage rocket: "A loose credit market and lower interest rates are pushing the market up. It is just like the first stage of the rocket lifting the satellite." The impetus from one stage of a rocket does not last long.

"The second stage of the rocket will be significant improvement in the real economy. For a real bull market, we need the third stage -- full recovery of private investment and fulfillment of the promise of the Third Plenary Session," he added.

In late August, CITIC Securities predicted the stock market rebound would end soon as "economic recovery starts to show fragility"; perhaps lukewarm manufacturing data as shown by an HSBC PMI that has dropped to its lowest level for three months?

It will take unequivocal signs that China's economy is entering a new phase to inject genuine confidence into the markets.

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