China's stocks looks to close rocky year with gains

Provided that stock markets on the Chinese mainland can stave off a deep plunge Monday, the benchmark Shanghai Composite Index is expected to gain year-on-year, which analysts say may be crucial to boost investor confidence over the short term.

The Shanghai Composite Index finished trading last week at 2,233.25 points, up 3.71 percent compared with the previous week; while the Shenzhen Component Index closed at 9,026.99 points, a weekly increase of 4.26 percent.

Last week, A-share markets in Shanghai and Shenzhen recorded their fourth straight round of week-on-week gains as trading sentiment improved on renewed investor confidence in the country's real economy and the prospect of expanded market liquidity in the future.

The Shanghai index carried the upward momentum picked up during the previous week into the first three trading days of last week before snapping its winning streak Thursday. Buoyed by the news that the China Securities Regulatory Commission (CSRC) had lowered the threshold for institutional investors to purchase subordinated bonds from brokerages, the securities sector got a lift Friday, helping Shanghai stocks end the day in positive territory.

Meanwhile, the combined turnover of the Shanghai Composite and the Shenzhen Component contracted 11.01 percent compared to Thursday to 177.25 billion yuan ($28.42 billion) Friday. Although total daily transaction volumes at the two markets hovered around 200 billion yuan last week, a relatively high level compared to the rest of the year, trading sentiment needs to be further boosted if A-share markets are to gain more ground next year, according to Gui Haoming, chief analyst at Shenyin & Waiguo Securities.

In terms of capital flow, A-shares saw a net drain of 3.65 billion yuan last week, down considerably from the 10 billion yuan outflow witnessed during the previous week. Brewing, non-ferrous metal and construction materials stocks recorded the largest outflows.

As of Friday, the Shanghai Composite and the Shenzhen Component had gained 12.78 percent and 14.22 percent respectively since the start of December. Advances made during December, the best trading month this year, have so far helped the Shanghai Composite gain 1.54 percent compared to the close of the previous year.

With an annual increase all but assured, most investors are upbeat about the mainland stock markets next year, according to the results of an online survey conducted by China Business News and Tencent. As of Friday, 44.13 percent of the survey's 6,044 respondents said they still have confidence in the markets in 2013 despite losses suffered this year.