'The Black Monday was a result of the regulator's lip service,' said a fund manager. 'At this critical moment, the regulator should seal its mouth. Otherwise, it keeps confusing investors.'

Since the start of the Beijing Olympics on August 8, the Shanghai index has tumbled 10.97 per cent, even though investors had expected a rally during the high-profile event.

The China Securities Regulatory Commission said on Friday that it would stabilise the market, promising to attract more long-term funds and curb sales of previously non-tradable shares.

However, investors were disappointed yesterday as none of the promised support measures materialised at the weekend.

On Sunday, the CSRC did unveil a rule on tender offer exemptions, but it had no positive impact on the market.

The Shanghai index has plunged 55.91 per cent this year. As the government usually introduces market-boosting measures at the end of the week, the term 'Black Monday' has been coined to describe a slide in stocks after the speculation of state help failed to materialise.

Sources said the CSRC had no power to announce substantive market-moving measures as top government officials were concentrating on the Games.

'The securities regulator can only give verbal support now,' said a source close to the CSRC. 'But the sentiment has become worse and worse as the lip service further provokes the ire of investors.'

Last week, the market was battered by worries over third-quarter earnings after Beijing announced that factory-gate prices last month soared 10 per cent.

'The economic conditions may deteriorate based on producer price inflation,' said Changjiang Securities analyst Zhong Hua. 'Third-quarter earnings would be the worst in the year and investors are rushing to cash out.'

The trading debut of China South Locomotive & Rolling Stock Corp also siphoned off buying interest in existing shares yesterday. The country's largest train maker soared 58.26 per cent to 3.45 yuan (HK$3.92).

'South Locomotive will not drag the market down much,' said China Jianyin Investment Securities analyst Yang Zongyao. 'We can't rule out the possibility that big funds were setting a trap for small investors, forcing them to cut their holdings.'

Some analysts said the low valuation of A shares had created good buying chances.

JP Morgan China equities chairman Jing Ulrich said mainland stocks might fare better later this year as valuation levels became more attractive and institutional investors started to use some of their cash holdings to re-enter the market. 'I advise investors if you have a two-year time horizon, this is a good time to buy, but if you have a two-week time horizon, I cannot advise you to buy or sell,' Mrs Ulrich said. 'It takes a brave soul to invest now because the index is depressed.'