The benchmark Shanghai Composite Index stood above the psychological benchmark of 3000 points on Thursday as the year is drawing to a close, and investors believe this may herald a positive outlook for the market's performance in 2020.

The Shanghai Composite Index gained 0.85 percent for the session to close at 3007.35 points on Thursday, while the Shenzhen Component Index also climbed 0.72 percent to end at 10303.72 points. Year-to-date, the Shanghai Index is on track to post a gain of more than 21 percent.

Securities firms were the major drivers for the Thursday advance. According to Shanghai-based market tracker Wind Info, A-share listed securities firms reported an average daily price increase of 3.3 percent. Other public financial service providers also saw their prices rise 2.34 percent on average on Thursday.

Yang Delong, chief economist of First Seafront Fund, said that securities firms that are seen as market indicators have shown robust growth over the past few weeks. As the Chinese financial market is further opened up to foreign security firms, domestic companies are seen improving their competitiveness.

Looking forward to the new year, Yang said that the Shanghai Composite Index will likely stand firm around the 3000-point area, while pointing to the possibility of a 20 percent increase, he said.

The State Council announced on Wednesday the removal of the household registration limits for cities with a population under 3 million people and relaxation of the limits for those between 3-5 million, in the hope of facilitating the free flow of the labor force.

Boosted by this latest policy, the property developers who are heavyweights of the A-share market reported a 1.9 percent average price increase on Thursday, which could provide a push to the market's upward momentum.

Analysts from Jufeng Investment wrote in a note that financial service providers, companies sensitive to economic cycles, and technology companies have become the major drivers for the A-share market since November.

Fluctuations seen last week were largely due to an expansion in the trading volume registered on Dec 17 as investors adjusted their positions with the end of the year in sight.

But as the adjustments ended and the market started to rebound again, the follow-through buying is expected to spill over into the new year, the market analysts said.

Zhang Yanpeng, head of the mutual funds investment department at Rosefinch Investment, said that investing in the A-share market will be more profitable than investing in commodities and bonds in 2020 as there will be four major reasons for the A-share market to climb.

Overseas capital inflows are expected to increase given a rise in the allocation to equity assets. Another source of attraction for investors would be the increased return on equity rate in public companies since the third quarter of this year.

Free cash flow of industry leaders will be largely improved in 2020. More importantly, the A-share market is still undervalued based on historic numbers, Zhang said.

Gao Yuncheng, general manager of Shanghai Greenwoods Asset Management, said that companies specializing in the new sectors of consumption, services and manufacturing will show strong growth in 2020. Mobile internet and medicine will continue to show room for solid gains, he said.