Chinese shares fell for a second consecutive day Monday after surging the most in seven years by over 9 percent last Thursday as the government cut the stamp duty on stock transactions from 0.3 percent to 0.1 percent. Weak performances by market heavyweights was the main drag.

Our Shanghai correspondent Zhou Jing takes a closer look.

Reporter:

On Monday, the benchmark Shanghai Composite Index closed over 2 percent lower than last Friday. The index has fallen for two consecutive days after it soared 9.29 percent last Thursday. Recently-boosted investor sentiment seems to have dampened again. Ms Zhou is a shareholder from Shanghai.

"The tax-cut euphoria faded so quickly. I'm really worried the index will continue to slump."
Xu Chuanbao, a stock analyst from Jinyuan Securities, says the trading day ended on a lower note because of the heavy selling of big blue-chips.

"Sinopec and China Life both dropped after reporting lower first-quarter profits. And none of the top 10 heavyweights managed to rise, which dragged the index down despite the robust performance of the agricultural and Olympics-related sectors."

The government cut the stamp duty on stock transactions to 0.1 percent from 0.3 percent, effective last Thursday, on which day the Shanghai index saw the biggest one-day jump in almost seven years. And earlier last week, China's securities regulator announced the restriction of sales on newly-freed previously non-tradable stocks held by big shareholders. The combined market-boosting moves came after the Shanghai index suffered its steepest decline in more than 11 years last week.

Xu Chuanbao says the current tumble in indexes is reasonable after the dramatic surge last week. But it will not alter the trend of the index bouncing back.

"Though so far the market is undergoing another see-saw period, the bullish tendency is already clear. After a deep plunge during the first quarter of this year, the market pressure and risks have been eased a lot. And with the government's supportive administrative measures, the shares will continue to rebound in the future."

Like Xu, many analysts showed optimism, predicting the index will have no problem hitting 3,800 on the back of the tax cut.

However, some market insiders said weak fundamentals and unfavorable Chinese economic growth data are likely to outweigh the positive impact of the government move, and the rebound may not last long.

The Shanghai Composite Index has more than halved since last October's peak level and reached a 13-month low of 2,990 last Tuesday.

Zhou Jing, CRI News, Shanghai.