Bank of America warns the latest surge in Chinese equities is unlikely to replicate last year’s explosive rally, when the CSI 300 Index jumped more than 30% in just weeks on a wave of stimulus-fuelled optimism. The benchmark has risen about 12% since early August to near a three-year high, but further gains may be capped as positioning is already “quite bullish,” says Lars Naeckter, head of Asia Pacific equity-derivatives research.Info comes via a Bloomberg (gated) report. In brief:Chinese stocks outperformed, underpinned by supportive policies, abundant liquidity, and enthusiasm around artificial intelligence. CSI 300 is toward overbought territoryNaeckter suggests investors should expect a “normal” and steady rally rather than another 25–30% burst higher, as many portfolios are already exposed to the trade.He recommends selling out-of-the-money calls to fund positions closer to current levels, a strategy that positions for a grind higher. With many global investors having pared back China exposure in recent years, he adds, the options market remains a relatively cheap way to re-engage without heavy downside risk. This article was written by Eamonn Sheridan at investinglive.com.