SHANGHAI (Reuters) — Madame Zheng, a 44-year-old accountant at a state-owned company, put 100,000 yuan ($13,000), about a year's salary, into China's stock market in the hope of making enough money to move into a better Shanghai apartment.But two days after buying oil refiner Sinopec, she sold it at a loss of 15 percent. And she's desperately holding on to other shares on which she faces losses of up to 40 percent, hoping they'll recover enough for her to get out.

She doesn't fully understand why the market plunged 13 percent over five days, after a bull run that nearly quadrupled the main index over 18 months. But she says she's learned her lesson.

"I'm not going to buy any more shares for the foreseeable future. If you don't put money in, you won't be disappointed," she said this week.

China, which triggered the stock market reversal with a hike in a share trading tax, is finding that the road to building a nation of small shareholders does not run smooth, as are Madame Zheng and hundreds of thousands of investors like her.

Millions of people have poured into the market this year, lured by the listings of the country's top companies and other government policies. Over 28 million stock investment accounts have been opened this year, after 3.08 million in all of 2006.

The rise in share ownership seemed one of China's biggest economic policy successes. The booming stock market promised to help companies restructure, wean them off excessive reliance on bank loans, and share the country's wealth more widely.

But many of the new investors who gambled on quick, easy returns, have concluded the bull run is over for now, and are fleeing the market almost as fast as they entered it, leaving the government struggling to prevent a crash.

"This is one of the sternest lessons that both investors and regulators have learned," said economist Gene Ma at CITIC Securities.

"When the index jumped from 3,000 to over 4,300 in late May, investors mainly bought rubbish stocks, while blue chips gained little. This betrays a stock culture that focuses on short-term speculation instead of long-term investment."

Shanghai's main stock index (.SSEC) rebounded 2.63 percent on Tuesday, but that only recouped a small fraction of a slide that has pushed the index down as much as 21 percent and wiped out $490 billion of value at one point.

The slide began after the Ministry of Finance hiked the stock trading tax last Wednesday, a move that made little difference to most investors' costs and was designed to cool the speculation that had pushed valuations to over twice the levels of many overseas markets.

But individual Chinese investors, who have come to account for up to 80 percent of daily market turnover, immediately began selling, and this snowballed into a panic.

Even institutional investors such as mutual funds, which tend to commit to stocks for the longer term, were pushed into selling to cut their losses.

"I'm leaving the market with nothing," said Miss Liu, a Shanghai university student who was visiting a Shanghai Securities branch in the city's financial district on Tuesday to sell her shares.

"The government does not care about the market, and nobody is doing anything. When the index is high, they talked a lot, but when it is declining, they remain silent."

Privately, some government officials concede they did not expect such a dramatic reaction to the tax hike.

"This is very much beyond the government's expectations. The market is really a mess," said one junior official who watches the market at an economic ministry in Beijing.

Attempts by authorities to revive confidence at the start of this week — positive editorials in state-run newspapers about the market's trend, and regulators' approval of four new equity investment funds — failed.

Many analysts now expect authorities to take stronger steps. They could approve more local and foreign mutual funds, quietly suspend a probe into illicit financing of stock investment, and perhaps encourage buying by state-controlled investment firms.

Rumours on Tuesday said government agencies would soon issue a policy statement to reassure investors. Officials could not be reached for comment.

Analysts do not believe investors' losses threaten the stability of the economy. UBS calculated in a report in April that stock investments still accounted for only about 11 percent of the financial wealth of households and companies.

And if the market does not continue sliding for too long, the recent pull-back could ultimately prove positive, by educating Chinese investors in the virtues of buying for the long term.

A consultant surnamed Shi at an international company in Shanghai said he began trading stocks last June and initially doubled his assets.

"About 30 percent of my gains have been wiped out now. So in the future I'll choose more rational, long-term investment," he said.