(Yicai Global) Jan. 29 -- The Chinese stock market  has rebounded from an earlier low after the China Securities Regulatory  Commission denied a market rumor that the watchdog's new chairman has been  tasked with setting up a market shorting mechanism.

The original media report said that the market  shorting mechanism would improve the delisting system and give companies  that commit financial fraud nowhere to hide. The regulator described  the report as fake news in a question-answer session on its website today. Yi Huiman was named the new head of the watchdog  on Jan. 26.

The benchmark Shanghai Composite Index was down  0.18 percent at 2,592.24 points as of 2.49 p.m., and it had gone as low  as 2,559.98 earlier. The Shenzhen Component Index was down 0.60 percent  at 7,543.76, while Shenzhen's ChiNext Price Index had fallen 1.34  percent to 1,242.87.

China's stock markets extended losses this morning  with major market indexes down more than one percent at one point  although the efforts of bargain-hunting investors spared the market any  further downward movement.

The Chinese regulator allows shorting activities in  its stock market though they are highly restricted and therefore  uncommon. With major indexes having slumped for almost one year, any  mention of shorting could hit market confidence again.