The leading stock index of Shanghai Stock Exchange, one of China's two bourses, closed higher Monday after dropping to an eight-year low of 998.23 points during the day's morning session.

The composite stock index of the Shanghai bourse, which covers yuan-denominated A shares and foreign-currency B shares listed on the bourse, picked up slightly to 1,005.82 points at midday and closed Monday at 1,034.38 points, up 2.05 percent from the previous trading day.

Meanwhile, the Component Stock Index on the Shenzhen Stock Exchange, closed at 2,729.20 points, up 102.17 points, or 3.98 percent, from Friday's close.

Experts and market participants blamed the falling prices on the uncertainty arising from the ongoing experiment of selling non-tradable state-owned shares and burst share price bubbles.

For many Chinese investors, the new eight year low is disappointing but not a surprise.

A minority stock holder surnamed Yang at a business hall of Minzu Securities Co in Beijing said that the market will likely drop further before it rebounds.

Hu Ruyin, supervisor in-chief with the research center of Shanghai Stock Exchange, said the slump is an overdue substantial adjustment, which is normal for capital market.

Without a sound regulatory mechanism in operation, the readjustment is needed to squeeze the bubbles out of the Chinese stock market.

"From the landmark high of 2,245 to the present-day standard, the falling range of share prices on China's stock exchanges is merely 50 percent, which is far less than those on the bourses in NASDAQ of the United States or in Germany during the same period of time," said Hu.

Dr. Ba Shusong, deputy director general of the Finance Institute of the Development Research Center of the State Council,said the index has been distorted after the experiment to sell non-tradable State-owned shares, or the pilot reform to solve split share structure issue.

The split share structure refers to the existence of a large volume of non-tradable state-owned and legal personal shares. This means only about one-third of the shares in domestically listed firms float on the markets. The structure puts public investors ina worse position than the actual controllers in making corporate policies and disposing of the firms' profits and assets.

Most participants had little doubt that the composite stock index of the Shanghai bourse would fall below the 1,000 points last week. On Friday, it fell to a new eight-year low of 1,000.52.

But the 1,000 point level has been considered an important psychological one by market participants, experts and regulators.

Shang Fulin, chairman of China Securities Regulatory Commission,told a meeting of the country's institutional investors on Sunday they should look at the difficulty the Chinese stock market is experiencing "from a rational perspective."

The market values of the shares held by China's fund management groups account for 22 percent of that of the country's total shares.

His remarks have been interpreted by experts as an appeal to those funds to make sure they will not dump shares intentionally to drag the index down.

Investors and experts still differ on whether the stock market will continue its downward trend.

Many believe the share index has almost reached its possible bottom line and many stocks have become increasingly attractive after the bearish market witnessed falls in the past four consecutive years.

They said the moves by central and provincial governments to crack down on rampant real estate speculation in the past few months, which will increase the flow of investment from the real estate market to stock market.

Qiu Yanying, an analyst with Tianxiang Investment Consultancy Co., said there is now very little room for the market to slump further, not to mention the possible crashing of the market.

Source: Xinhua