Regulatory measures put stocks into a spin

The CSI 300 Index, which tracks major shares in Shanghai and Shenzhen, has soared 34 percent in the past two months, and some analysts said the market needs a correction to continue rising in the long run.

Others suggested it is providing good opportunities for latecomers to get on the train, and they expected the central bank to announce another rate cut in the coming weeks that will inject new liquidity into the equity market.

"We maintain the view that the stock market will go up, with some volatility, during the second quarter as the monetary environment remains loose," said UBS Securities LLC in a research note on Wednesday.

"We have not noticed any fundamental change in the attitude of the supervisors to contain the market, although they are reminding us of risks.

"Secondly, there is no remarkable increase in share supply," the note said.

Nick Gardiner, a partner and managing director of Boston Consulting Group, predicted China will see a reduction in the speculative role of margin trading, with greater participation by long-term institutional investors.

He said there is a need to upgrade the risk management capability of securities firms, a precondition for them to expand the scale of their business using greater leverage.