CHINA’S stocks surrendered early gains and ended lower yesterday as fears of a deeper correction outweighed a chorus of upbeat media commentaries, which declared the bull market was not over.

    The CSI300 index of the largest listed companies in Shanghai and Shenzhen ended the session down 0.95 percent at 4,553.33 points, after rising more than 2 percent at one point in morning trade.

    The Shanghai Composite Index retreated 1.62 percent, ending at 4,229.27, also erasing sharp early gains. The Shenzhen Composite Index closed down 0.50 percent.

    A liquidity-driven rally fueled heavily by borrowed money has seen China’s major indices almost double in the past year, despite deteriorating company earnings and slowing economic growth. That has triggered expectations of a sharp correction.

    On Tuesday, stocks suffered their biggest one-day loss in nearly four months, hit by a combination of factors including tougher margin trading rules, a fresh wave of listings and speculation of a hike in stamp duty on stock trading.

    “The market will enter a correction phase, and it will be very volatile,” Hong Hao, managing director of BOCOM International said yesterday.

    “Expensive valuations, euphoric sentiment and slowing liquidity from margin lending expansion will challenge the market in the near term,” he said.

    But some analysts said the bull market was merely changing gear, not direction.

    “The government wants a slow bull market that can last for one or two years,” said David Dai, investor director at Nanhai Fund Management Co.

    “But if the market rises too fast, the bull market will end in several months.”

    Investors like Dai took cues from bullish commentaries published yesterday by Xinhua, which were apparently aimed at calming markets after Tuesday’s tumble.

    “Both regulators and stock investors hope to see steady and healthy development of the market,” said a Xinhua analysis.

    “In the medium term, there’s adequate upward momentum, so market bullishness will continue,” the report said, citing loose monetary policy and the trend of people moving money into equities.

    Analysts have said that policymakers want to shore up confidence as economic growth slows amid a slumping property sector, industrial overcapacity and weak exports. China’s economic growth was at its slowest in six years in the first quarter.

    Analysts have also said that the government is hoping that a stronger stock market will help more companies gain access to capital markets to reduce financing costs. (SD-Agencies)