The benchmark Shanghai Composite Index has retreated more than 12 percent so far this year as lingering concerns over tightening monetary policies keep the mood subdued. 

On May 4, the first trading day after the central bank announced a reserve requirement ratio hike for the third time this year, the Shanghai Composite Index dropped by 1.29 percent to a seven-month low. 

Unlike mature markets where institutional investors focus on fundamentals, the fledgling Chinese markets are dominated by retail investors driven by speculation. As a result, government policies have easily tipped the balance of the market to the bearish side, said Pan Xiangdong, an analyst with the Everbright Securities Co. Ltd. 

Investors' jitters are rooted in the fear that more aggressive tightening moves are drawing near though the latest hike in reserve requirement ratio possibly delays an interest rate adjustment, said Pan Xiangdong.

Worries also abound that corporate profit growth could slow down this year, making stock valuations less attractive, added Pan.

With a bear market awakened from its slumber, the question on investors' minds is when it will start to bottom out, the prospect of which is not so promising. 

Among the pessimists are the stock funds, which held back on stock exposure, leaving an average of 78 percent of their funds in stocks in April, down from 90 percent by the end of 2009, said a report by the Beijing-based Desheng Fund Research Center.

Though in part intended to meet redemption requests, the funds' sell-off has only added to liquidity concerns clouding the market, said Pan.