Shanghai shares may find some support this week after experiencing a sagging start in the Year of the Mouse, after the securities regulator approved two new stock funds.

But cash calls from new large-cap stock offerings and the January inflation data to be released this week could keep weighing on the market, analysts said.

Bank of China Investment Management Co and AXA SPDB Investment Managers have won the nod from the China Securities Regulatory Commission to launch two funds that could raise a combined 19 billion yuan (US$2.6 billion), Xinhua news agency reported late on Friday.

This is the second time in a month that China has approved new funds to bolster the market. The regulator had suspended approval of new mutual funds since September when the market rose too fast.

The Shanghai Composite Index lost 2.23 percent last week amid revived concerns over fresh monetary tightening measures after the central bank reported a rise in new lending and higher-than-expected money supply growth for January.

The benchmark index closed at 4,497.13 on Friday, or more than 25 percent below its record high of 6,124 in mid-October.

"The market has been weak," said Cinda Securities strategist Liu Jingde. "January's consumer price index is expected to remain high and it could trigger further selling pressure."

In addition, a flood of new shares is expected to put pressure onto the market. China Railway Construction Corp said it would start take subscriptions on February 25 as it received regulatory approval for its Shanghai IPO last week.

Air China Ltd, the nation's biggest international carrier, has said 350 million of its A shares would become tradable today after a lock-up period for strategic investors in its IPO expired.

(Shanghai Daily February 18, 2008)