Stock index queers future

New financial derivative, weak policies and laxsupervision have caused share prices to plunge

The stock market has tumbled again, with the benchmark Shanghai Composite Index dropping 15 percent, from 3,166 on April 15 to 2,696 at May 14's closing session. Such a drastic drop in such a short period has not been seen since stock prices plummeted in the months following the global financial crisis in late 2007. Many domestic security analysts have attributed the drop to the gloomy economic prospect at home and abroad - which is the result of the stern policies and measures taken by the State Council and local governments to curb the sizzling real estate market, and the sovereign debt crisis in Greece and other European countries and the turbulence in Wall Street.

Despite their impact on the domestic stock market, these problems are by no means the dominant factor that have caused China's A-share prices to drop the most among the world's major stock markets. For a fledging market that still does not have a high degree of transparency, any negative news from the outside world is likely to create an impact on China's A-share market but unlikely to be the key factor determining its tendency.