* Chinese main indexes dropped more than 6 pct Thurs
* Selloff provoked by multiple factors given anxious market
* Analysts see more volatility to come
* Opinion split on if selloff marks start of wider correction
By Pete Sweeney
SHANGHAI, May 29 (Reuters) - China stocks bounced in and out of positive territory Friday morning in highly volatile trade after a Thursday rout saw main indexes lose over 6 percent in record turnover.
Both CSI300 index and the Shanghai Composite Index seemed to find a floor at mid-morning, but that came after the SSEC briefly fell more than 4 percent in early trade.
The ChiNext small cap growth board strongly outperformed, however, staying in positive territory, up between 1-2 percent.
The 4 percent SSEC fall, combined with the Thursday slide after a peak hit Wednesday, put the Shanghai market down over 11 percent in two trading days, considered technical correction territory by traders. But it only lasted for a blink before buyers moved back in.
Analysts were divided as to whether the Thursday slump was the beginning of a long-dreaded major correction or a fresh buying opportunity.
“The correction is not yet over,” said David Dai, Shanghai-based investment director at Nanhai Fund Management Co Ltd.
“Yesterday’s slump was too rapid, so many investors didn’t have time to flee. Many are still seeking exit. The market has risen too much, and too fast, so the confluence of bad news is causing panic selling.”
The bad news included signs that brokerages were tightening up on margin finance - seen as a reaction to regulatory window guidance - and an unusual move by the central bank to drain an unspecified amount of liquidity from the interbank market through targeted bond repurchase agreements.
Analysts also cited a move by a central government asset management holding company Central Huijin to unload holdings in major state-owned banks.
“It’s a normal correction,” said Xiao Shijun, analyst at Guodu Securities in Beijing.
“Many factors, including upcoming IPOs, margin financing checks, decrease of bank shareholdings by Central Huijin are all giving good reason for investors to take profits and the market to correct.”
Xiao said Central Huijin’s move can be viewed as a signal the government ”attempts to cool the recent overheated stock market as they are always eager for a steady, rather than, crazy bull.
“I expect to see more volatility in the short term. The correction is probable to last for a while until the mid-June when the funds locked up for this round of IPOs unfreeze,” he said.
In Hong Kong the Hang Seng index was up slightly, but the China Enterprises Index stayed down. (Additional reporting by Samuel Shen and the Shanghai Newsroom; Editing by Richard Borsuk)