Analysts believed factors such as improved corporate earnings and sustained economic growth will further buoy the market although short-term declines are also likely to be seen.

The Shanghai Composite Index, which covers yuan-backed A shares and hard-currency B chips, added 3.7 percent last week to finish on Friday at 2,937.91, the highest close since an all-time record of 3,040.60 on February 26.

The index gradually recovered from an 8.84 percent plunge on February 27, the steepest one-day slump in a decade, as investors stepped in to seek bargains, analysts said.

"The good fundamentals and an upbeat outlook on the stock market have yet to change," said Chen Jinren, a Huatai Securities Co analyst. "Quality property and financial firms should draw investor attention after their drops in the past trading days."

The Chinese yuan last week repeatedly hit record highs against the US dollar since a direct peg to the greenback was scrapped in July 2005.

US Treasury Henry Paulson visited China on Wednesday and Thursday and delivered a speech urging Chinese regulators to further open up financial markets and ease a rigid exchange-rate regime.

"In the long haul, the yuan is on an upside track, which will bolster yuan-denominated assets at listed firms," said Liu Yu, an Orient Securities Co trader. "The nation's fast economic growth will justify rosy profit projections for mainland firms."

Although a market upswing is widely expected, near-term corrections may set in largely due to a profit-taking mentality as wider volatility adds to investor uncertainties, analysts said.

"An across-the-board rally, which was often seen in 2006, won't likely come this year as many companies are traded at a quite high price level," said Zhu Yiwen, an Industrial Securities Co trader.

"We might see funds rotate more often among different sectors. I advise investors to pay close attention to chips with solid growth prospects but have not had hefty gains in their stock prices."

Beijing Shoufang Investment Consulting Co expected the Shanghai barometer to move between 2,880 and 3,050 this week.

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