SHANGHAI stocks may extend their rally this week after the Chinese central bank announced last week a cut in the bank reserve requirement ratio, according to market watchers.

The Shanghai Composite Index last week gained 0.22 percent to finish at 2,357.18 and capped a five-week winning streak.

The People's Bank of China announced late Saturday a cut in the requirement ratio for banks by 0.5 percentage point from Friday. The cut, the second in three months, may pump about 410 billion yuan into the system.

Li Daxiao, director of Yingda Securities research center, said the ratio cut may help stocks rally today and will have a positive impact on the stock market.

Chongyang Investment Co echoed Li's view by saying "the move would also help to lift market confidence."