Stocks surge calls for reality check

China's stock markets notched another week of impressive gains last week, thanks to strong performances in the financial and infrastructure sectors. Specifically, the Shanghai Composite Index picked up 1.58 percent week-on-week to close at 3,157.6 points; while the Shenzhen Component Index rose 1.65 percent to hit 10,802.64 points.

Such jumps have become common of late, prompting some experts to warn that the market lacks a foundation in the real economy. Without a basis in strong economic fundamentals, recent run-ups could soon prove unsustainable. Until then, mounting speculative pressure could force local markets to even loftier heights.

If problems related to overcapacity cannot be resolved, more challenges will emerge in China's economic transformation and industrial upgrading process. More innovation is the only way to support research and development, and the price of stocks.

The record levels of trading activity seen recently in China's markets appear far removed from economic reality. Right now, investors should focus on enterprises that can deliver value for shareholders over the long term.