Policies Likely to Extend Upward Direction

The Shanghai stock market is expected to extend an upward trend this week, backed by a positive central government financial policy and a looser monetary policy, analysts said.

The key Shanghai Composite Index, which tracks yuan-denominated A shares and hard currency B shares, rose 4.6 percent to close at 1,904.86 last week.

"China's central bank has announced moves to support the stock market, and the government is also drawing up measures to bolster 10 industries, which encouraged investor confidence despite a pessimistic outlook for annual corporate earnings," said Liu Guanghuan, an analyst at Fareast Securities Co. He forecast the index to range between 1,800 and 2,000 this week.

The People's Bank of China called for moves to support the stock market at a meeting earlier this month, including issuing more bonds and developing more channels for direct financing. However, market watchers expect worsening corporate earnings to dampen the market.

"More listed companies have cut their annual earnings forecasts, which is worse than expected," said Zhou Yu, an analyst at Pacific Securities Co.

Zhou forecast the benchmark index between 1,850 and 2,050.