"Recent media reports on comments made by our leader in Hong Kong are false and misleading," the Shanghai Securities News reported Friday, citing an unidentified CSRC official.

Other official securities newspapers also carry the same news on their front pages.

The CSRC official specifically cited news reports about the possible launch of mega IPOs and index futures, which have driven domestic share prices to levels not seen since late January.

On Thursday, the benchmark Shanghai Composite Index, which tracks A and B shares, broke below its psychological 1400-point level, falling 2.5 percent to 1390.63.

On Wednesday, the Securities Times quoted CSRC Chairman Zhou Xiaochuan as saying that one of the major problems facing the mainland stock market was that there are too many small-capitalized listed companies.

Stock investors, fed by subsequent online reports and commentaries, interpreted the remarks to signal that the government is set to unleash several large-capitalized IPOs.

As a result, the Shanghai Composite Index, which tracks both A and B shares, has fallen 4.9 percent in the past two days, while its Shenzhen counterpart slumped 5.8 percent during the same period.

The unidentified CSRC official also denied reports of plans to launch stock index futures.

The introduction of stock index futures was expected to drive liquidity out of the stock market and may lead to short-selling in the bourse, analysts said.

After volatile trading, which saw the key indexes move in and out of negative territory, China's shares ended slightly higher Friday.

The Shanghai Composite Index closed 0.4 percent higher at 1395.50, while the Shenzhen Composite Index gained 0.2 percent to close at 394.60.

"The regulator's denial is helpful to stabilize market sentiment," said Wang Xiaomin, an analyst at Xiangcai Securities in Shanghai. "Investors began to look for bargains in the oversold market."

(Shenzhen Daily November 25, 2002)