Stock markets in China and other parts of East Asia are set to rally over the next year as prices remain relatively cheap compared with U.S. and European shares, though the pace of rising U.S. interest rates may cap gains, Reuters polls showed.

Many of these stock markets have lagged a global bull run this year amid worries over China's slowing economy, though Beijing is widely expected to roll out more stimulus measures in coming months to shore up growth.

The Shanghai Composite Index is seen rising over 3 per cent to 2,425 points by the end of the year from Wednesday's close of 2343.57, and then rise another 7 per cent in 2015, the survey conducted over the past week showed.

It has advanced about 10 per cent so far this year, with the bulk of the gains coming in recent months as investors bet on further policy easing.

That comes despite widespread concerns about a falling property market and no clear drivers for a major pickup in growth. But to many investors, stock prices there look relatively cheap after a steep fall in 2013 and the first half of this year.

"We'll see some funds switching back from developed countries to seek opportunities in other markets," said Ben Kwong, director at KGI Asia.

Thomson Reuters I/B/E/S estimates show Chinese stocks are currently trading even lower than their 12-month forward earnings outlook, indicating there may be more room for appreciation.

Somewhat better economic readings recently may also provide a short-term boost in the Chinese stock market.

A preliminary purchasing managers survey showed China's vast factory sector picked up a bit of momentum in September, although the heftiest job cuts in 5-1/2 years and falling house prices that run a real risk of turning into an outright crash will likely keep a lid on gains.

The housing market, which accounts for about 15 per cent of the economy, is going through one of its worst downturns. Chinese developers are trying hard to sell properties by slashing prices, while local governments are easing restrictions and allowing people to buy multiple homes.

But equity analysts, always a bullish lot, seem to have discounted most of those risks, calling instead for a rally that looks hinged on the easy liquidity provided by the People's Bank of China.

HONG KONG, KOREA STOCKS TO EXTEND RALLY

The one notable exception is India. Mumbai shares have rallied by more than a quarter this year on anticipation of and follow-through after a landslide election in May of the first majority government in New Delhi for three decades.

The BSE Sensex is expected to touch 32,500 by end-year, gaining nearly another quarter on top of that rally. That would probably make it one of the best performers on world equity markets.

The latest Reuters poll also suggested the Hang Seng Index will put in a very strong performance during the remainder of the year.

It is expected to soar to 25,750 points by December from Wednesday's 23,921.61, an almost 8 per cent rise, outperforming most its peers.

It is then seen surging to 28,000 by the end of 2015.

The Korea Composite Stock Price Index (KOSPI) is expected to rise nearly 5 per cent from now until the end of the year to reach a 3-year high, after gaining a modest 1.2 per cent so far in 2014.

From then until the end of next year, it will likely add another 6 per cent to reach 2,275 points.

However, analysts cautioned the U.S Federal Reserve's next move, after the end of its stimulus programme expected in October, could lead to money flowing out of the region and into U.S. stocks and bonds.

"The speed of change in the Fed's monetary policy stance must be carefully monitored, because despite the unwinding of stimulus, asset prices that have been augmented by it are showing little signs of losing steam," said Kang Hyun-gi, a market analyst at IM Investment & Securities.

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