(Yicai) Jan. 7 -- Chinese mainland equities are poised for further gains following a post-New Year holiday rally, with analysts citing accelerated local government bond issuance, stepped-up public project investment, and rising domestic and foreign capital inflows as key drivers.

A “spring rally” is already underway, with market swings possible, according to the strategy team at Huaxin Securities. Technology and some cyclical stocks are likely to outperform, they noted. “A-shares are likely to keep rising and maintain the momentum of the spring rally,” strategists at China Merchants Securities said, using a commonly used term for mainland equities.

The Shanghai Composite Index is at a 10-year high, after climbing for 14 straight trading days, while the Shenzhen Component Index and tech-heavy ChiNext Index are also at multi-year highs.

Mainland stocks have further to run, after investor sentiment was boosted by gains in the Hong Kong market and the Chinese yuan following the New Year break, Yang Chao, chief strategy analyst at Galaxy Securities, said in a research report. Momentum will depend on policy expectations and sector-specific developments at home as well as overseas geopolitical risks, Yang noted.

The stock market’s advance will likely continue, driven by accelerated local government special bond issuance, central government budgetary investment in public projects, and improving government spending data, China Merchants Securities noted.

Accumulated profit-making effects may also encourage domestic funds to raise their holdings of mainland shares, while the yuan’s appreciation and improving economic prospects could support renewed foreign buying, the CMS team added.

The rally has been partly fueled by a 10 percent increase in the number of new mainland trading accounts last year, according to Shanghai Stock Exchange figures. Some 27.3 million were opened by individual investors and 104,539 by institutional investors, gains of 9.7 percent and 35 percent, respectively.

Last month alone, 2.6 million new accounts were opened, a 9 percent increase from the previous month and up 31 percent from a year earlier, the data also showed.

Editor: Futura Costaglione