Continuous capital market reforms and further opening of the financial industry to foreign capital will lend solid support to China's A-share market this year and market analysts remain cautiously optimistic about Chinese stock market prospects this year.

The benchmark Shanghai Composite Index gained 22.3 percent in 2019, its best annual performance since 2014. The Shenzhen Component Index also rallied 44.08 percent in the past year, the biggest annual gain in nearly 10 years.

Analysts believe that market sentiment will continue to be supported by investors' expectation of more capital market reforms this year, which will help boost the quality of the listed companies, improve the efficiency of the Chinese stock market and make it more market-oriented.

China's top leadership pledged at the Central Economic Work Conference in December to speed up financial sector reforms and continue improving the underlying framework of the capital market.

From diversifying financing channels for the country's private and smaller firms to further liberalizing the financial market to foreign investors, the reform measures have helped facilitate China's economic upgrading and defuse financial risks, analysts said.

The recently adopted revision of the Securities Law has also set the legal basis for China to expand the pilot registration-based system for initial public offerings to the whole A-share market. It means that the country's new share sale system will be market-based and administrative approval will no longer be required.

The capital market reforms have helped create more policy consistency and improved market transparency, which will boost investors' confidence and draw more institutional capital from home and abroad into the A-share market this year.

Analysts at Guosheng Securities said in a research note that foreign capital, insurance funds and wealth management money will continue to flow into the A-share market this year and they will be the most important supporting factor for any possible rise of the Chinese stock market this year.

This view was echoed by analysts at Industrial Securities who believe that institutional investors including insurers and pension funds have been flowing into the A-share market in a faster pace and the Chinese stock market will likely appear attractive to some investors as the global market has entered a period of negative interest rates.

Yang Delong, chief economist of Shenzhen-based First Seafront Fund, said that the valuations of the A-share market remain attractive compared with global equities markets and the trend of the stabilizing and steady growth of the Chinese economy in the mid and long-term has not changed, which will continue to draw global capital into the Chinese market.

Possible recovery of corporate profitability as a result of the government's pro-growth policies this year will also bring structural opportunities in the A-share market, analysts at BOC International said.

The China Securities Regulatory Commission, the country's top securities watchdog, is scheduled to hold its annual work conference this month. The CSRC is expected to lay out its work priorities and reform objectives at the meeting.

In September, the CSRC listed 12 priorities for deepening the reform of the capital market, charting a clear roadmap for the sector.

The key tasks include giving full play to the role of the STAR Market, the high-tech and innovative board on the Shanghai Stock Exchange, as an experimental field, encouraging listed companies to enhance their quality, further promoting the reform of the Nasdaq-style board ChiNext, and pushing faster improvement in China's National Equities Exchange and Quotations, or the "new third board".

In a bid to accelerate the high-level opening up of the capital market, China will implement opening-up measures and safeguard financial security in an open environment, the regulator said.

"With the implementation of the reform measures, China's capital market will see fundamental improvement to better play its role in facilitating economic transformation and high-quality development," said Han Qian, a professor at the School of Economics at Xiamen University.

Xinhua contributed to this story.