After peaking in June at around 6. 2 percent, China's inflation is likely to stabilize in the second half of 2011, said China Construction Bank International Securities Ltd. (CCBIS), a professional brokerage on Wednesday.

Surveys and analysis indicated that liquidity in China is sufficient to support economic growth, and a strong consumption trend and robust loan demand will continue, with destocking in many industries possibly ending soon, said CCBIS in its 3Q 2011 outlook on the mainland and Hong Kong markets.

CCBIS, in the report, forecast an inflation of 5.4 percent in 3Q this year, and a 4.9 percent for 2011. "It is possible that China will halt further credit tightening and price control measures to avoid the risk of a 'hard landing'," said Banny Lam, associate director at CCBIS, to the media.

Besides, the start of restocking in some manufacturing enterprises will raise demand for production in 3Q and accelerate growth in manufacturing activities, which will be translated into higher product demand and corporate earning growth, Lam said.

China's economy was expected to expand by 9.4 percent in 2011.

CCBIS also forecasted a recovery in investment sentiment due to fading concerns over further credit tightening, the release of strong corporate earnings growth in the first half of 2011, and the return of Japanese corporations to normal operation.

For Hong Kong, inflation will remain a key issue for the rest of the year, said Lam, who predicted a high CPI of 6.3 percent for 2011. "However, Hong Kong's robust economic growth and low unemployment rate will help, to some extent, ease inflation pressure,"he added.

CCBIS foresaw a 5.7 percent increase in Hong Kong's GDP and an unemployment rate of 2.8 percent in 2011.