Chinese investors are driving a sharp rally in the country’s stock markets, even as international investors have been deterred by years of underperformance and persistent deflationary pressures.

The mainland’s CSI 300 benchmark index traded flat in the first six months of this year but has posted double-digit gains since the end of June. It is now up 14.3 per cent so far this year, more than the main US, European and Japanese benchmarks, in local currency terms.

Easing trade tensions with the US has calmed investors’ nerves. But analysts say it is primarily low interest rates, near-record low bond yields and a lack of attractive alternatives that have driven Chinese retail and institutional investors into A-shares, traded on the country’s onshore stock markets.