SHANGHAI'S key stock index may decline this week as the market is expected to correct after making gains in the past month, according to analysts.

The Shanghai Composite Index fell 1.8 percent last week, the first weekly loss after Chinese Premier Wen Jiabao pledged a "fine-tuning" of the government's tight policies on October 24.

But Shenyin & Wanguo Securities Co wrote in a report that if there are "no positive policies to be announced this week, the stock market may enter a period of correction."

The brokerage noted that trading in shares of smaller companies were more active than blue chips last week - a sign of short-term speculation.

Analysts also worried that liquidity will be tight this week due to the largest number of initial public offerings in three weeks.

Southwest Securities Co wrote in a note that the pending IPOs may cause the market to decline in the first half of this week.

The central government released data last week which showed that inflation in the country cooled to 5.5 percent in October from September's 6.1 percent. The size of yuan lending in October rose to a four-month high of 586.8 billion yuan (US$92.5 billion), giving hopes to speculation the central government is easing its monetary policies in some sectors.

But China's exports in October grew at the slowest pace in eight months.