WITH investor sentiment remaining in the doldrums the key Shanghai stock index is not expected to rebound significantly this week after suffering the biggest weekly loss in three months last week.

"The sentiment is weak because there are no positive factors that investors can look forward to," Qian Qimin, a Shenyin Wanguo Securities strategist, wrote in a note.

"Hopes that the market may turn around in the short-term are slim because of the unfavorable macrco-economic situation, inflationary pressure and the central government's tight monetary policy," Qian said.

The Shanghai Composite Index fell 3.21 percent last week to close at 2,528.28 points amid concerns that liquidity may get even tighter after the People's Bank of China ordered banks to put aside more funds with the central bank.

The move may drain 900 billion yuan (US$141 billion) from the banking system over six months, according to Bank of America Merrill Lynch.

Qian forecast the index to remain between 2,500-2,570 this week.

The Shanghai index may decline below 2,500 this week and even drop to its intra-year low of 2,437, according to Zhang Gang, an analyst at Southwest Securities.

Source:shanghaidaily