The Shanghai stock market is expected to be flat this week on tepid investor sentiment on concerns over liquidity, and investors are also keeping an eye on the central economic work conference that will set the direction for macro-economic policies next year.

The conference, which usually takes place at the beginning of December, will set the development strategy and target for next year. Media reports have cited people close to the meeting as saying that policy makers may set the inflation target at 4 percent for 2011 and step up efforts to manage monetary supply and liquidity.

Investors are worried that rising inflation will result in a tightened monetary policy which will hurt liquidity in the stock market.

"The central economic work conference is likely to address key issues, including tackling inflation, stimulus measures to foster emerging industries and economic restructuring," said Yuan Xuya, research head at China Central Securities.

Qian Qimin, an analyst at Shenyin and Wanguo Securities, sees the Shanghai Composite Index at between 2,800 and 3,000 points this week as "the index will remain rather stable from a technical perspective ... as it will be rather difficult to climb over 3,000 points."

The benchmark Index has lost about 4 percent this month. The People's Bank of China, the central bank, raised the reserve requirement ratios for banks twice in November to a record 18.5 percent.

Pacific Securities' analyst Zhou Yu forecasts a mild and temporary rebound for the index but "market sentiment will remain rather modest before more macro-economic policies are announced."

The gauge shed 0.92 percent last Friday to end the week at 2,871.7.