ALTHOUGH a technical rebound may take place this week following eight straight sessions of decline for Shanghai stocks, it can't fundamentally change the market's downward trend, analysts said.
"There will be a weak technical rebound on Monday and Tuesday as no negative news was announced over the weekend, but the index is likely to stay below 3,000 points," said Qian Qimin, an analyst at Shenyin & Wanguo Securities Co.
Investors are quite pessimistic about the market presently and even if the stock market regulator were to introduce positive measures, the moves would not make an immediate impact, Qian said.
The benchmark Shanghai Composite Index dropped 13.84 percent last week to close at 2,868.80 points on Friday after the central bank told lenders to set aside a record amount in reserves as part of efforts to curb liquidity and inflation. This was the worst weekly performance in almost 12 years.
Although China's consumer prices in May slowed to 7.7 percent from April's 8.5 percent on falling food costs, the Producer Price Index, the factory-gate inflation gauge, surged 8.2 percent in the period to reach its highest in more than three years, the National Bureau of Statistics said last week.
Money supply grew last month, and the market believed the central bank will continue to maintain a tight monetary policy and raise interest rates to curb inflation.
"The disposal of non-tradable shares increased heavy pressure on the market as current capital can't support the continuous selling of these shares in the next two years," said Liu Jingde, an analyst at Cinda Securities Co, who expects the index to range between 2,700 and 3,200 points this week.