By Lu Jianxin and Eric Burroughs
SHANGHAI/HONG KONG - Aug 19 (Reuters) - China's benchmark Shanghai Composite Index may stabilise at around 2,700 points as valuations become more compelling, with any further drop seen prompting officials to take action to prop up the market.
* The 2,700 level is seen as key because it marks the 125-day moving average, the Chinese market definition of a bear market. A fall below that could spur further panic selling after the more than 20 percent slide in just two weeks.
* While investors believe the bull run is over in Shanghai, few expect a sustained fall in shares because corporate profits have rebounded this year along with the surprisingly strong bounce in economic growth.
* Combined Shanghai and Shenzhen A-listed shares are trading at about 25 times forecast earnings for this year, according to Reuters calculations -- a high level but one that is seen as compelling given China's turbo-charged economic growth.
* Forecasts are for Chinese earnings-per-share growth of 22-23 percent this year and in 2010 compared with historical EPS growth of 35.2 percent, according to Thomson Reuters I/B/E/S.
* The official Shanghai Securities News reported on Tuesday that about half of China's more than 1,600 listed companies that have reported results have seen net profit soar 70 percent in the second quarter from the first three months of the year.
* The fall in the stock market is not seen tied to any change of opinion on the economic recovery that saw growth accelerate to a 7.9 percent annual pace in the second quarter, with the latest data prompting economists to upgrade economic forecasts.
* Officials are concerned about the market's sharp retreat. China's three most influential official securities newspapers published bullish comments on Wednesday and sought to talk up the mood, which is typical in the market's 18-year history.
* Authorities will probably be reluctant to intervene unless the Shanghai Composite falls sharply below 2,500 points in coming weeks and they believe panic is starting to grip the market.
* As a first measure, officials would likely try to talk up the economy's strength and the health of corporate profits.
* More serious intervention could involve an announced slowdown in the number of initial public offerings that have started to hit the market in the past month and have been cited as one factor sparking the retreat from a 14-month high earlier in the month.
* Other intervention could involve China's $200 billion sovereign fund, China Investment Corp, saying saying it would start buying shares in big state-owned banks, such as Industrial and Commercial Bank of China and Bank of China.
* CIC bought bank shares several times last year when the market tumbled 65 percent, its biggest yearly drop on record. (Editing by Jan Dahinten)