Chinese shares are expected to rise modestly this week. [File photo]

Shanghai's stocks may rise modestly this week following an improvement in the liquidity situation while investor worries over the European debt crisis began to ease, market watchers said.

The Shanghai Composite Index ended at 2,439.63 last Friday, bringing the weekly gains to 3.5 percent and capping a six-week winning streak - the longest since November 2010.

Shenyin & Wanguo Securities said the market may consolidate between 2,400 and 2,500 as short-term speculators may continue to dominate trading.

Investor sentiment was high last week after the People's Bank of China trimmed the reserve requirement ratio for banks by 0.5 percentage point. The cut, effective last Friday, was said to have injected 400 billion yuan (US$63.5 billion) into the financial system.

However, Hongyuan Securities said the effect of the monetary policy fine-tuning may not last long in the market, and investor sentiment may weaken ahead of the release of China's Purchasing Managers' Index, a reflection of industrial activities, for February on Thursday.

Investors breathed a sigh of relief after an aid package of 130 billion euros (US$170 billion) was finally released to debt-ridden Greece.