''The market has been flooded with new shares. Investors are not quite happy with that,'' she said.

An analyst at Shenzhen-based J&A Securities said about 10 companies had listed A shares in Shenzhen this year, but many more were lining up for listings.

An immediate effect of the rash of new listings had been a lacklustre secondary market and a fall in the index, he said.

Given the current market conditions in Shenzhen, where liquidity has dried up and trading has been sluggish, analysts said the clampdown, although radical, could be a short-term measure to boost sentiment.

They said although the notice was put out before trading opened, the market fluctuated wildly in the first 20 minutes of trade.

Selling pressure emerged before the index calmed down 10 minutes later, setting the tone for the remainder of the day.

Triggered by the exchange's action, the Credit Lyonnais Shenzhen A index notched up 60.44 points or 3.88 per cent to 1,617.39.

Turnover was a heavy 1.02 billion yuan (about HK$903 million).

Analysts warned that the problems could not be solved by a ''quick fix'' which did not address the real issues.

They said the problem lay with the Government's over-ambitious plan of enlarging its stock markets, while ignoring those markets' capacity to absorb new shares.

News that China is to release 5.5 billion A shares this year had caused unease among investors late last year, but the potential effect had only been fully recognised early this year when other factors came into play.

Mainland investors were thrown into confusion over the package of economic reforms and its possible impact.

Assurances by mainland officials failed to allay fears.

The stock market reacted with a sharp downward swing, with the Credit Lyonnais Shenzhen A index having lost 10 per cent so far this year.

Another hard blow to the market was an announcement that companies were restricted to issuing up to 30 per cent of their shares by way of rights issues.

Rights issues are welcomed by mainland investors who are given the chance to buy stocks at lower prices than in the market. Dilution of earnings is of little consideration to them.

Of the five billion shares approved for listing last year, only about 2.6 billion were listed by the end of last year, said Ms Lee.

This meant the remaining 2.4 billion shares would have to be listed this year, putting a strain on the exchange listing schedule.

It was unclear whether approval from the China Securities Regulatory Commission was required for the exchange's move. Spokesmen could not be reached for comment.

In Shanghai, the city's stock exchange listing chief Qiang Zhiying said ''it is impossible'' for it to follow suit.

She said the Shanghai exchange's plans were on schedule for the first quarter. It had listed more than 1.3 billion shares so far, despite the falling market.

An analyst with a British brokerage house said: ''It's a radical move, a short-term measure which is not fundamentally good for the market.'' But he said it was better to delay listings as the market needed time to absorb newcomers.

''The heavy turnover has indicated that local investors may be cashing in on the chance to dump shares - and others are looking at snapping up cheaper counters.

''I think the Chinese authorities are cautious with the A-share market. You can tell from the announcement that the second batch of 22 Chinese enterprises are banned from issuing A shares initially.'' Companies in the first batch had seen their A share prices under heavy pressure. The huge size of the companies limited their share price movements.