The Composite Stock Index on the Shanghai Stock Exchange closed at 1438.74 points Monday, dropping by 2.26 percent from the previous close, while that of the Shenzhen Stock Exchange decreased by 2.34 percent to 3302.53 points.

This was another dark day in the two-month bear period for many Chinese stock investors. Some investors began to lose confidence about this year's market prospect.

"It is hard for the current downturn to be changed in a short time," said Wang Yu, an analyst with the Orient Stock Institute.

However, early this year a large number of China's individual investors, who had suffered a bear market for the last three years, became more optimistic and were looking forward to a better year in 2004.

"China's stocks have become worthwhile once again after three bearish years, and our dream to see a bullish 2004 may come true," said Hu Yongnai, who was among the first individual investors in Shanghai.

Many domestic investors were greatly encouraged in February by upbeat news from the central government. On Feb. 2, 2004, after the State Council announced its decision in a lengthy document to further promote the capital market and improve related policies, the Shanghai bourse surged by 32.95 points to 1,623.68, while the Shenzhen composite index rose sharply by 58.01 points to close at 3,774.88 points.

"This year's stock market will be better than the last as the market is showing signs of an upward trend," said Yang Huaiding, known to many Chinese investors as "Millionaire Yang" for his legendary success in the newly-opened Chinese stock market in the early 1990s.

Yet the high expectation has not come true. From April, China's stock market came into another bear period, with composite index dropping by more than 10 percent over the two-month period.

Analysts attribute the stock plummet to many factors. The possibility the central bank will raise interest rates to further cool the economy shadows the market prospect, some said.

However, Qin Hong, an analyst in Jiangsu Province said "the interest rise does not necessarily mean the drop of stock index."

People's doubt about listing companies' capabilities to gain profit, the fund outflow to other places and the continuous increase of new listing companies are the main causes for the downturn, he said.

Some owed the share plummet to the planned establishment of a qualified domestic institutional investor (QDII) system.

The QDII system, which would allow domestic institutional investors to invest in capital markets abroad, is expected to be established this year.

Source: Xinhua