The authority's comment came at a time when booming domestic bourses benefited from huge capital inflows, which fueled regulatory concerns over potential bubbles in the market.

"Recent positive shifts in the market are only preliminary," said Shang Fulin, chairman of the China Securities Regulatory Commission in a speech posted in major stock newspapers.

"Internal and external factors that could hinder the long-term healthy development of the market have yet to change and the foundation for stable growth is still not sound."

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China's benchmark Shanghai Composite Index jumped 130 percent in 2006 and extended its gains early this year partly due to a string of market revamps, which have made all equities tradable and bolstered corporate governance.

The regulator started a campaign in May 2005 to convert non-tradable shares at listed companies, which accounted for two-thirds of the total market value and were mostly held by state institutions, into tradable entities.

As the majority of domestic public firms have wrapped up the share conversions, Shang depicted the reform as a turning point for the market, but indicated that the foundation is not solid enough for faster and larger overhauls.

Case in point, the CSRC has postponed the launch of stock-index futures, which had originally been scheduled to debut late last year, citing immature market conditions and prolonged preparatory work.

Shang said in the speech that the stock regulator will introduce stock index futures when "preparations are sufficient and conditions mature," without giving a timetable. He had previously said the launch could come as early as this month.

Stock-index futures are derivatives that would let investors bet on an equity barometer's drop to profit, a practice currently banned by the regulator on worries over rampant speculation and greater market volatility.

Shang's speech was delivered over the weekend at the annual national securities and futures conference in Beijing, a meeting designed to outline securities work highlights for the year.

The chairman also vowed to encourage long-term investors to step into the market while regulators will continue to beef up corporate governance and improve information disclosures.

Authorities will urge listed firms to adopt new accounting rules, boost the market's risk-management system and clamp down on profit falsifications, Shang said.

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