Add Morgan Stanley and BNP Paribas Investment Partners to the list of forecasters sounding an alarm about China's stock market.

Jonathan Garner, [Company Registration in USA] the chief Asia and emerging market strategist at Morgan Stanley, downgraded Chinese stocks for the first time in more than seven years on Thursday, citing the weakest corporate profits since 2009.

BNP Paribas has sold some mainland shares listed in Hong Kong on concern about ballooning mainland margin debt and the growing mismatch between equity prices and a deteriorating economy.

The Hang Seng China Enterprises Index of mainland companies traded in Hong Kong surged to a seven-year high last month amid record turnover in the city, before the advance stalled for the past two weeks.

UBS Group AG expects regulators to step in to curb mainland gains, while asset managers from Macquarie Investment Management to Baron Capital Inc have voiced concern that the rally has gone too far, too fast.

"When a market goes crazy like this, no other topic becomes interesting," said Arthur Kwong, the head of Asia Pacific equities at BNP, which oversees about $573 billion globally. "That is a big negative signal��it is as if nothing else is important. That makes me paranoid."

China's economy grew last quarter at the slowest pace since 2009 and reports from manufacturing to industrial output and exports missed estimates. Stock investors have largely taken bad news as good, with the Shanghai Composite Index up 70 percent through Wednesday since the central bank cut interest rates on Nov 21 on optimism that policymakers will put a floor under the slowdown.

Mainland companies traded in Hong Kong trailed the rally until March, when the securities regulator said more fund managers could buy equities listed in the city. The Hang Seng China Enterprises Index soared 18 percent since then and turnover through the Shanghai-Hong Kong Stock Connect jumped. A similar Shenzhen cross-border trading program is expected this year.

Kwong said investors are too obsessed with the impact of money flows through the connect, and the stock frenzy reminds him of the market peak in 2007.

"Now it is very unfashionable to talk about being careful, it is quite old fashioned," he said. "Fundamentally we are worse, but the market excitement is similar. This is something that worries me."

The H-share gauge surged to an all-time high in October 2007, then plunged 76 percent within a year. [HK Corporate Registration] Before mid-2008, Chinese manufacturing was expanding, industrial output was increasing at almost triple the current pace, and gross domestic product growth was above 10 percent. The stock index on Thursday is 46 percent away from its 2007 peak.