Shanghai's stocks may remain weak in the two trading days before the week-long Lunar New Year holiday, which starts on Wednesday, as investors choose to stay away from the market.

Analysts said the index, which fell drastically over the past weeks, may rebound later this month partly buoyed by expectations the central government may relax credit control to support economic growth now hampered by the worst weather disruption.

"A rebound is expected today, or tomorrow or after the holiday. Anyway now we are near the bottom," said an analyst at Guangzhou Wanlong, an investment consultancy.

Amid the worst snowstorms in five decades in China and fears of a United States recession, the Shanghai Composite Index slumped 9.26 percent last week to 4,320.77, the largest drop in more than a decade.

The benchmark had tumbled 8.1 percent the previous week. Last Friday's close was about 30 percent off its record high recorded in mid-October.

"People sold holdings amid worries a US slowdown which would reduce demand for Chinese exports, and the bad weather would hurt domestic economic growth," said Huatai Securities analyst Chen Huiqin. "Many possibly will choose to go back to the market after they are more certain about the macro environment."

The market has been expecting that China may relax its grip on a three-month-old monetary tightening measure in the face of slowing exports and disruption of industrial output due to the blizzards in south China.

Also, Li Rongrong, chief of the State-owned Assets Supervision and Administration Commission, said the snowstorm, which had forced factories to shut, won't affect listed state firms' earnings as long as they make up for the losses by arranging additional production.

(Shanghai Daily February 4, 2008)