Chinese stocks are still among the world’s worst performers this year. In addition to the trade war threat, investors have been troubled by a domestic deleveraging campaign weighing on liquidity, signs of an economic slowdown, and a weaker currency.

The Shanghai index is in a bear market after dropping more than 20 percent from its January high. “There’s room for a technical rebound after the selloff in past few weeks, while regulators’ positive comments on A shares showing value also helped,” said Shen Zhengyang, Shanghai-based strategist with Northeast Securities Co.

The Shanghai Stock Exchange said in a statement Sunday that valuations of companies listed on the exchange and big-cap blue chips are at reasonable or even relatively low levels when compared with peers in major economies. Value is emerging after recent declines, it said.

China International Capital Corp. said there’s medium-to- long term opportunities in A shares as valuations and sentiment have hit the bottom, while brokerages including Citic Securities Co. and Essence Securities Co. now expect the market to rebound.

Credit Suisse Group AG remains cautious, forecasting further losses over the coming weeks. It added that the downside would be limited by solid fundamentals.

Eoin Treacy's view

The Renminbi has bounced over the course of the last week and is looking increasingly likely to stage a reversionary rally back towards the region of the trend mean.

The Chinese stock market has been falling aggressively and has been led lower by the banking sector since encountering resistance in the region of the trend mean at the end of the May. A short-term oversold condition is evident and the Shanghai A-Share Index is back in the region of the 2016 lows so there is scope for some steadying or a reversionary rally.

The Banks Index has bounced impressively but, so far, the China Enterprises Index’s (H-Shares) bounce has been rather muted. It will need to follow through on the upside tomorrow to confirm a return to demand dominance.