Chinese mainland's stock market should extend gains this week due to more capitals at the beginning of a year, analysts said.
But the increases may be limited as investors stay cautious prior to annual working conferences by the central bank and other government departments scheduled this month, which will set the tone for the financial market in 2011.
The benchmark Shanghai Composite Index gained 1.09 percent in the first week of 2011 after a 14 percent fall last year.
"The market liquidity is improving as banks extend loans more readily due to the new annual lending quota," said Zeng Xianzhao, an analyst with Everbright Securities. "In addition, the establishment of new funds will help shares that have dropped rebound to their normal values."
Media reports said January may see new yuan lending climb to 1 trillion yuan (US$149 billion).
Banks and real estate -developers outperformed the market and pushed up the key index last week as investors speculated that these sectors are close to bottoming out.
However, analysts said that the strong momentum provided by lenders and property developers could not continue without sufficient transaction value and that there are still uncertainties in the tightening policies.
The Agricultural Bank of China, the nation's third-largest lender, said it plans to sell as much as 50 billion yuan of subordinated debt to increase capital-adequacy-ratio.
