The injection of assets by the parent companies of their listed units could whip the Chinese stock market into another bullish run, says a report from CITIC Securities.

China's stock market, which turned in a stellar performance in 2006, plunged nearly 9 percent on February 27 on rumors that China might impose a capital gains tax.

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The report contends that the slump was similar to what happened last June, when the market nosedived as government-inspired reforms came to an end. Since July, it has not been the government's shareholder structure reforms that have driven the market but rather IPOs and robust performances by listed companies, the report says.

An assets injection by parent companies into listed companies could be a new driving force for the stock market, says Dr. Cheng Weiqing from CITIC Securities.

Controlling parent companies can expect higher gains from the market if they decide to inject assets into listed firms.

The body supervising China's state-owned assets is also in favor of assets injection and the listing of companies is seen as a means of improving state-owned enterprises.

The state-owned enterprises under supervision are active in major industrial sectors such as defense, petroleum, and electricity. The companies listed in these sectors account for only 16 percent of the total number of companies listed, but their business revenue is closer to 40 percent.

The net assets of state-owned enterprises stand at 5.4 trillion yuan (692 billion U.S. dollars) but the net assets of their listed subsidiaries are less than 1 trillion yuan.

Many of the assets of non-listed controlling parent companies could be used as the source of an assets injection, the report claims.

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