Leung said there were three factors behind the strong rally in Chinese stocks.
Firstly, investors now appeared to be "more optimistic" about the direction of U.S.-China trade negotiations, he said: "Even if it doesn't get better, (people) are now expecting it not to be worse."
The Wall Street Journal reported Sunday that the U.S. and China are "in the final stage of completing a trade deal," with Beijing offering to lower tariffs on U.S. products in categories ranging from chemicals to autos. For its part, the U.S. is considering eliminating most, if not all, of the trade sanctions placed on Chinese goods last year, according to the Journal.
This was in contrast to 2018, when markets in China were "pricing in pretty bad scenarios" around issues such as the state of the country's economy and the trade war between Beijing and Washington, Leung added.
Secondly, Leung said, capital appeared to be returning to Chinese shares as a result of policies introduced by Beijing to boost the country's currency, stock market and real economy.
"Given China is a momentum-driven market, capital inflow will lead to even more capital inflow," he said.
The third factor was last week's decision by global index provider MSCI to substantially increase the weighting of mainland China shares in its benchmarks. This, Leung said, was a move that would likely draw more foreign institutional capital into the Chinese market.
"(The) MSCI's decision on A-shares' higher weighting will fuel the already cheap A-shares to go higher," said Jackson Wong, associate director at Huarong International Securities. A "significantly higher turnover" in the Chinese markets indicated that a "bull-run is forming," he added.
Overall, mainland Chinese shares are likely to trade higher this year, said Haitong's Leung, as long as the "worst case scenarios" for the economy and trade negotiations do not come to fruition.
