China won't directly intervene in stock market -adviser

SHANGHAI, May 22 (Reuters) The Chinese government is unlikely to interfere directly in the domestic stock market, a Chinese central bank adviser was quoted today as saying.

Some securities analysts and fund managers have said Beijing might take stronger measures to rein in the current bull run in the stock market and drive out speculative money.

The Securities Times quoted Fan as saying the latest monetary tightening moves were largely aimed at reducing money supply and excess liquidity in the economy rather than at the stock market itself.

''The government is not going to take steps to support or intervene in the stock market. The market will be left alone to undertake its own risks,'' said Fan,a member of the central bank's monetary policy committee.

''The market is getting mature and so is the government.'' China's stock market shrugged off the central bank's decision on Friday to raise bank interest rates and reserve requirements, ending up 1 percent yesterday, fuelling concerns more market-cooling steps may be on the cards.

In 1996, the government halted a bull run in the domestic currency A share market by using the People's Daily, the Communist Party's mouthpiece, to warn in an editorial against ''excessive speculation''.

Early this month, central bank governor Zhou Xiaochuan said he was concerned by a stock bubble and would monitor asset prices.

Fan was quoted as saying that the central bank always kept a close eye on asset prices when it came to drafting monetary policies because fluctuations in asset prices will lead to fluctuations in the economy, a key lesson of the 1997/98 Asian economic crisis.

China's inflationary pressure was easing due to softening grain prices, but the possibility of a sharp rebound could not be ruled out yet, Fan said.

REUTERS KK PM0704