The key Shanghai index is likely to touch 4,000 points this week as the stock market has entered what is called a ''red'' May, analysts predicted.

The A-share market is turning warm and expected to return to the 4,000-point mark in the second quarter as regulators continue to stabilize the market and better-than-expected economic figures may cheer up investors, Orient Securities Co said.

The securities regulator has issued new rules and policies frequently over the past few months to try and boost the weak stock market, including a cut in stamp duty, the introduction of an off-market block trading system, a more transparent information disclosure process, and various regulations to improve trading infrastructure.

"Heavyweight stocks led the market to rebound on the last trading day (Wednesday) of last week, which indicated an end to the short-term correction and that the index would rise," according to Yinhua Investment Co.

GF Securities Co also expected that May would be the starting point of a mid-term rebound and investors should invest in the following couple of months which offer the best investment period this year.

The benchmark Shanghai Composite Index dropped 34 percent in the first quarter amid concerns over inflation and an economic slowdown. It has risen 6.3 percent since April 1 with positive government policies and climbed 3.8 percent last week, which was shortened due to the Labor Day holiday, to 3,693.11.

However, some brokers voiced cautiousness.

"First-quarter earnings showed a southward trend which would hinder the market from rebounding rapidly this month," said Industrial Securities Co.

It suggested financial, machinery, real estate, metal and Olympic-related stocks as investment opportunities in the second quarter.