Although Shanghai's key stock index rebounded last Friday, analysts said the jury is still out on whether the market had bottomed out.

"It's hard to be optimistic," said Qin Hong, an analyst at Bohai Investment Consulting. "New share supplies will exceed what the market can absorb and the uncertainties for first-quarter earnings will also weigh on the market."

Top Chinese mill Baoshan Iron & Steel Co reported an unexpected drop in annual earnings last week.

The Shanghai Composite Index rebounded 4.94 percent to close at 3,580.15 last Friday, narrowing last week's loss to 5.7 percent. The gauge touched a low of 3,357.23 in early Friday trade, below the 3,404 hit last June which some analysts consider a key support level.

Shenyin Wanguo Securities strategist Qian Qimin said last Friday's gain was partly stimulated by speculation that the stock market regulator, the China Securities Regulatory Commission, has started to approve the launch of stock-index futures.

Tough day

But he cautioned that launching the index futures may not necessarily be a positive move.

Also, the market had strongly expected the regulator to announce certain incentives over the weekend such as a cut in the stock trading tax. But analysts said the market could face a tough day today with no positive measures coming anytime soon.

The index has tumbled 17.67 percent since March and some analysts predicted the barometer would fell below 3,000 in the absence of major concrete incentives, although the CSRC approved two more stock funds last week to shore up the sagging market.

Last week's plunge also came as several blue-chips including China Shipping Container Lines Co and China Pacific Insurance (Group) Co dropped below their initial public offering prices.

(Shanghai Daily March 31, 2008)