Some investors are cautious despite China's surging optimism.

• Analysts said that China's latest policy signals have a greater impact on sentiment than resolving deeper issues such as real estate.
• "Ting Lu, Nomura's chief China economist, stated that the "shock and awe" strategy may have been intended to stimulate markets and increase confidence, but ultimately, it is crucial to implement well-considered policies to tackle the underlying issues."
• According to Paul Christopher, head of global investment strategy at Wells Fargo Investment Institute, China's policy moves to lower interest rates have not helped improve confidence among consumers who are fearful of borrowing in the first place.

Analysts said that China's latest policy signals have a greater impact on sentiment than resolving deeper issues such as real estate.

On Thursday, the Shanghai Composite stock market reached a three-month high after Chinese President Xi Jinping led a Politburo meeting on the economy in the morning.

The unexpected high-level gathering called for a halt in the property market decline and the strengthening of fiscal and monetary policy, but did not provide specifics, only affirming the central bank rate cuts announced earlier in the week.

Ting Lu, Nomura's chief China economist, stated in a report on Friday that markets should recognize the severity of the economic situation in Beijing and how its current piecemeal approach has not been effective.

"Lu stated that the "shock and awe" strategy may have been intended to stimulate markets and increase confidence, but ultimately, it is crucial to implement carefully considered policies to tackle the underlying issues."

The real estate slump has slowed growth in the world's second-largest economy, with retail sales and industrial profits barely increasing in recent months. However, exports remain a bright spot.

Lu, a policymaker at Nomura, emphasized the need for stabilizing property, which has been in contraction for four years. He predicted that the additional stimulus would only have a minimal impact of less than 3% on China's annual GDP.

"Lu advised that markets should prioritize the specifics of the stimulus. If the program is not carefully designed, it could have a limited impact on growth, despite appearing large and hasty."

Despite reports of plans to lower rates for existing mortgage holders, the People's Bank of China this week did not cut major interest rates, and the Ministry of Finance has yet to release major policies.

Questions about scale

Despite the positive outlook, some investment institutions remain unconvinced about China's future.

According to Paul Christopher, head of global investment strategy at Wells Fargo Investment Institute, China's policy moves to lower interest rates have not helped improve confidence among consumers who are fearful of borrowing in the first place.

""At this point, we plan to sell emerging market equities because we lack confidence in Beijing's ability to provide the necessary large stimulus," he stated."

The announcement of fiscal stimulus on Thursday is welcome, but it is uncertain if China's government will take the necessary steps to repair the psychological damage to household and private business sentiment.

In recent years, the Chinese government has tightened its regulations on real estate developers, after-school tutoring businesses, and the gaming industry. However, policymakers have since relaxed their stance, but business and consumer confidence have not yet fully recovered.

The U.S. Federal Reserve's shift to easier monetary policy has prompted China's central bank to cut interest rates further.

Despite historic lows in the cost of borrowing, a survey conducted in September by the U.S.-based China Beige Book found that corporate borrowing decreased among more than 1,200 companies in China.

According to Shehzad Qazi, chief operating officer at the China Beige Book, while one may hope for a wealth effect from stocks and property, the gains from stocks are temporary and the decline in wealth from property is significant, outweighing any potential relief.

Sales may increase slightly in the next four to six months, according to his expectations.

Qazi anticipates the ongoing rally in Chinese stocks to persist until the end of the year. However, he warned that the recently announced policies aimed at increasing capital in the stock market are not yet operational and may never be.

Sentiment change

Despite the caveats, investors continue to invest in Chinese stocks, as the CSI 300 stock index is experiencing a surge in demand.

The sentiment shift has spread globally.

"David Tepper, a U.S. billionaire hedge fund founder, stated on CNBC's "Squawk Box" on Thursday that he believed the Fed's actions last week would lead to China easing, but was surprised by their response, which involved bringing out "big guns." He added that there has been a significant shift in the market."

Tepper said he bought more Chinese stocks this week.

The government meeting on Thursday showed support for capital markets, while China has had a more negative view of the financial industry in recent years, according to Bruce Liu, CEO of Esoterica Capital.

"I hope this meeting will rectify this misunderstanding," he stated. "For China to sustain its growth in a healthy manner, it is crucial to have a well-functioning capital market."

"Liu stated that they didn't receive any different messages, but what made a difference was their emphasis on detailed action plans."