After the 7.73 percent dive on Tuesday, the mainland stock market slid a further 1.57 percent yesterday to close at a 14-month low.
The benchmark Shanghai Composite Index opened 0.98 percent lower in the morning and slid below the 3000 point mark, when the market received technical support and regained some lost ground to finally close at 3024.24.
The Shenzhen Component Index shed 2.86 percent, or 307.82 points, to close at 10458.08.
The turnover on the two bourses amounted to 80 billion yuan, down 9.3 percent from Tuesday. The total capitalization was 19.75 trillion yuan.
Shares of stockbrokers outperformed the market, with rumors that the government may soon launch margin trading to support the market.
"It's possible the government will launch margin trading to energize the market, but the number of brokerage firms allowed to do that and the scale of financing will be strictly controlled," said Zhu Haibin, an analyst at Essence Securities.
Haitong Securities, which has the largest amount of reserved capital among all domestic brokerage firms, soared 9.98 percent to close at 28.87 yuan and Sinolink Securities surged 6.64 percent to close at 49.28 yuan.
"But launching margin trading may not be a good choice for the government at the moment as the inflationary pressure still exists and tightening measures are still in place," Zhu added.
The producer price index (PPI) for May, announced yesterday, was 8.2 percent compared with April's 8.1 percent.
"The rise in PPI threatens to sustain higher levels of CPI even as food prices, the main contributor to the current bout of inflation, stabilize," said Jing Ulrich, chairman of JPMorgan Securities China Equities.
Investor sentiment is unlikely to recover in the short term despite the relatively low valuation of A-share companies, analysts said. The average price-earnings ratio of A-share companies is well below 20.
A report released by Industrial and Commercial Bank of China on Tuesday showed people are becoming more cautious while investing because of the slowdown of China's exports growth and the persistent tightening measures.
The willingness to invest in stocks in the coming months dropped from 32 percent in the past to 17 percent, while that in mutual funds fell from 26 percent to 12 percent.
Source: China Daily
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