SHANGHAI'S stocks may continue a rebound with volatility next week after achieving the biggest weekly gain in a year last week, analysts said.

The Shanghai Composite Index climbed 6.7 percent last week to close at 2,473.4 points after European Union leaders reached a last-minute deal to battle the euro debt crisis and China's top economic planning body said inflation is likely to slow to less than five percent within the next two months.

The strong sentiment was also reflected by the turnover, which expanded to the highest level in two months last Friday.

Yi Xiaobin, an analyst from Galaxy Securities Co, said the market recovery is expected to continue this week on anticipation that China might ease its tightening monetary policies.

China will "fine-tune" its economic policies in an appropriate degree and appropriate time and secure "reasonable" money supply growth in the coming months, Premier Wen Jiabao said this week.

"But the market growth needs to be realized gradually and there are also possibilities for market fluctuations in a short time," Yi cautioned.

Zhang Gang from Southwest Securities echoed Yi's view on a limited rise for the index.

"The release of PMI might also encourage investors," said Zhang. "But since there are more stocks to repair the loss in their paper values after the index surpasses 2,500, the market growth might turn to slowly climb."

He sees the index to go between 2,450 and 2,550 this week and suggest investors focus on cement, home appliance and nonferrous metal sectors.

Meanwhile, the biggest reshuffle of top financial regulators in a decade announced during the weekend may also boost market confidence, analysts said.

Source:shanghaidaily