An investor looks at stock information at a securities company in Zhengzhou, Henan Province January 26, 2007. [newsphoto]

China's stock indices stabilized Thursday following the previous day's dive of five per cent amid concerns over market overvaluation.

The Shanghai Composite Index lost less than one point to close at 2785.43 against a 4.92 per cent drop on Wednesday. The Shenzhen Composite Index ended up at 0.58 per cent at 659.32 after a 5.8 per cent slide the previous day.

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The Shanghai index dipped to 2,706.29 before climbing to 2,742.19 at the close of the morning session. The Shenzhen index fell to 635.31 before climbing to over 643 at the morning session.

Bellwether China Life, the nation's biggest life insurer, helped stabilize the Shanghai bourse as it rose 1.54 per cent to 38.8 yuan.

But the Bank of China moved in the opposite direction as it dropped 2.21 per cent to finish at 4.85 yuan. Several other financial institutions joined the Bank of China, with the China Merchants Bank ending down 1.51 per cent at 16.91 yuan and the Industrial and Commercial Bank of China losing 0.19 per cent to finish at 5 yuan.

Air China, the nation's most profitable carrier, dragged on the Shanghai index as it dropped 4.25 per cent to 6.76 yuan.

Property developer China Vanke contributed to the comeback of the Shenzhen burse. It gained 2.22 per cent to close at 15.65 yuan against a dive of 9.4 per cent on Wednesday.

Thursday's Trading was smaller than that of the previous day on both bourses. The Shanghai Stock Exchange saw 9.344 billion shares changing hands at a volume of 69.673 billion yuan compared with the previous day's turnover of 86.14 billion yuan. In Shenzhen, the turnover was 35.205 billion as 856 million shares were traded against Wednesday's turnover of 42.49 billion yuan.

Advancing shares outnumbered declining ones by 448 to 308 in the Shanghai Stock Exchange and by 287 to 229 in Shenzhen.

Wednesday's tumble came after a top legislator warned of bubbles in the stock market, prompting worries that the regulators might step in to cool down the market.

Regulators have shown signs of cracking down on what they may consider excessive fund flows into stocks. There are many such flows -- the Shanghai Securities News estimated on Wednesday that several billion yuan had been raised to buy stocks by people hocking personal possessions at pawn shops.

The government has said it will enforce a land appreciation tax, while the banking regulator ordered banks to enforce a ban on the investment of loan money in shares.

Wednesday's fall was widely seen as a short-term correction. Most analysts believed the market is bound to continue to climb in the long-term.

China's markets languished for years before reviving last year after shareholding reforms and other measures helped bring price manipulation and other abuses under control. Market sentiment has been further boosted by recovering corporate earnings and an economy growing at a rate of more than 10 percent a year.

Chinese retail investors, bereft of lucrative investment options in a still immature capital market, have been shifting en masse back into stocks after years of staying away.

Before Wednesday's tumble, the Shanghai index, which tracks China's biggest companies, was up 9.5 percent for the year after after soaring 134 percent last year. The Shenzhen index, meanwhile, had soared 26.4 percent since the start of the year before Wednesday's drop.