Liquidity vital to cementing stocks outlook

Some forecast gains of more than 20% next year helped by reforms that should make SOEs more profitable

The year-end stock market rally has sucked in billions of yuan of new money from hundreds of thousands of investors, ending a slump of many years. Many investors are now taking stock of their gains while wondering what to expect in 2015 and what to watch to determine the market's direction.

The answer is simple: liquidity. As any analyst knows, liquidity on the Chinese mainland is determined by the central bank. Any investor who tries to ignore that reality should put their money elsewhere.