Widespread hope of a sustained stock market recovery following the pre-holiday index spurt was dashed when the market resumed trading on Monday after a week-long break.

The Shanghai Composite Index lost 0.56 percent to 2074.42 and the Shenzhen Component Index lost 1.6 percent to 8540.08, ending a run-up in the week before the market closed for the holiday on Sept 28.

Quick to find an excuse for the market reverse, stock analysts pointed their fingers at the scheduled increase in scripts resulting from the planned unlocking of 1.8 billion nontradable shares valued at an estimated 17.9 billion yuan ($2.84 billion). These shares will be released in batches throughout the week to Friday.

In the week just before the eight-day holiday, nontradable shares valued at about 2.8 billion yuan were unlocked and entered the Shenzhen and Shanghai stock markets, according to a report in Shanghai Securities News.

Meanwhile, the China Securities Regulatory Commission's review of IPO applications from Chongqing Gas Group Co Ltd and Shenzhen Suntak Circuit Technology Co Ltd, scheduled for Wednesday, is seen by investors as a sign that the watchdog has relented on any restrictions it might have imposed on the flood of new shares into the market.

Experts said the release of more nontradable shares and the restarting of the processing of initial public offering applications in October may lead to an oversupply of stocks.

But some analysts said that investors may have overreacted to this "negative news," which, they maintained, should have a limited impact on overall share prices.

Zhang Qi, a stock analyst with Haitong Securities Co Ltd, said resuming IPO application reviews will dilute stock market liquidity by increasing supplies, but the impact will not be significant as the volume is not going to be considerable based on current data.

IPO approval procedures have been suspended for nearly two months, the longest halt on new offerings since July 2009, and the restart may raise concerns that the move will further drag down the already sluggish stock market.

As many as 758 domestic companies in the IPO pipeline await regulatory approval to list as of Sept 6, according to a recent report in China Business News, citing CSRC figures.

Zhang said a number of stocks have been undervalued as investors lack confidence because of gloomy market conditions and economic growth that is slower than that of past years.

Investors may see a different picture after fourth-quarter reports are released, he added.

wuyiyao@chinadaily.com.cn