Shanghai's stocks may pick up this week as economic data have pointed to cooler inflation and liquidity is seen to improve, analysts said.

The Shanghai Composite Index ended a seven-week winning streak when it lost 0.86 percent on Friday to close at 2,439.46.

But the key index is expected to climb this week as market observers speculate that China will have a larger room to ease its monetary policy after the National Bureau of Statistics said inflation in February slowed to a 20 month-low of 3.2 percent.

Other data, including industrial production, retail sales and bank lending, grew slightly slower in the first two month of this year compared to a year ago, while the producer price index added 0.1 percentage point to 0.7 percent in February, the first gain in seven months.

"The economic data suggested that China has entered a stage of economic recovery as inflation seems to be getting relatively cooler," Southwest Securities Co wrote in a note.

The seven-day repurchase ratio, a gauge of the cost of borrowing among banks, declined last week to below 3 percent for the first time since May last year, indicating that liquidity may be improving.

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