Investment bank UBS AG on Tuesday forecast a 20 percent increase in the A-share market until the end of the year, on predictions that short-term liquidity will remain high and corporate earnings will improve.

Chen Li, UBS' head of China equity strategy, reiterated his belief from the beginning of the year that the Shanghai Composite Index will end the year above 2,600 points, as the Chinese economy continues to recover.

"I am prudently optimistic about the A-share market this year ... though there are some downside risks," Chen said at a news conference in Hong Kong.