A RAGING bear market on the mainland is showing few signs of abating and investors bailed out of equities last week in search of higher-yielding bonds after another sharp fall in share prices. The Shanghai and Shenzhen A-share markets - which are only open to local investors - have plunged in recent weeks, fuelling speculation the Government will have to take measures to restore confidence. The A-share markets both shed about 10 per cent of their value in midweek before stabilising. Two weeks ago the markets lost about 15 per cent in value before a small rebound recovered about half the losses. The Shanghai index is now down about 65 per cent from its peak in February last year, while the losses in Shenzhen have been similar. Only two years ago, millions of investors were queueing up for a chance to take part in the newly opened share market in the belief it was a sure-fire way to make money. ''People are getting burned and are feeling very frustrated. Rather than waiting and seeing whether they can recover their losses, they are pulling out and looking at more secure methods of investment,'' said one head of China research in Hong Kong. ''Individual deposits at banks are going up sharply,'' he added. Analysts said domestic buyers were turning to treasury bonds issued by the Government, which give a fixed yield of between 12 and 15 per cent per annum. While observers were once confident the Shanghai A-share market would not fall beyond the psychologically important 600-point barrier, they are now expressing doubts on even this support level. ''If inflation is still staggering, I am sure the A-share index will continue to fall as more people will turn to more secure ways to save their wealth such as buying Government bonds,'' said Mr Samson Chau, senior manager of Peregrine Brokerage in Hong Kong. The Government's plan to issue 100 billion yuan (about HK$88 billion) of treasury bonds this year is expected to continue sucking money out of equities. Brokers said the Chinese Government's tightening of monetary policy in controlling bank credit and money supply were the main causes of the bearish sentiment. ''The economic reform is just part of the process of the transition to a socialist market economy, and investors [will] have to learn from the experience,'' said a Shanghai broker. Mr Chau, of Peregrine Brokerage, said mainland investors needed to learn more than the ups and downs in the market. ''Many of the investors in China are still very naive. They would buy a share at a price of two dollars rather than another type at four dollars simply because it is cheaper. They don't even take a look at the [price-earnings ratio] or the dilution,'' said Mr Chau. But despite the sell-off, the mood is not expected to spread to the B-share markets, which are open to foreign investors. ''As far as I have seen in the past, the performance of the A-share index is not that related to the B shares basically because they are different pools of investors,'' said Marianne Yau of the DBS Brokerage in Hong Kong. Analysts expect the bear market in China's A shares to continue for several more months although the performance of the markets will be closely linked to the success or otherwise of the attempts to cool the mainland's inflation rate, running at more than 20 per cent. The issuance of two-and three-year treasury bonds was also expected to finish at the end of the month, which could persuade investors to stay in the market and hope for the best, said one analyst.