Hong Kong shares are expected to rise above 12,500 points for the first time in almost four months this week on hopes of robust corporate earning reports.
But concerns over high oil prices and caution ahead of a key US interest rate meeting will keep gains in check, market watchers said.
"The blue chip earnings have been looking quite good. The dividend yield is attracting people - it's better than what you can get in the bank," said Kitty Chan, portfolio manager at Rexcapital Asset Management.
The benchmark Hang Seng Index ended down 0.11 percent at 12,478.68 points on Friday but was up two percent on the week.
Despite a first-quarter rally, the index is down 0.8 percent in 2004.
Top Wall Street economists are expecting the Federal Reserve to raise US interest rates by a quarter percentage point on August 10.
Hong Kong's currency is pegged to the US dollar and local rates usually track those in the United States.
Planes, computers and electricity will be in focus this week as some of the city's biggest blue chips report earnings. Huaneng Power International Inc will report on Tuesday while Cathay Pacific Airways Ltd and China's biggest PC maker Lenovo Group Ltd release results on Wednesday.
Huaneng, China's largest independent power producer, should report a 7.2 percent rise in first-half earnings due to soaring demand in the energy-hungry country.
Cathay is expected to make a net profit in the first half of HK$2.042 billion (US $262 million) according to an average forecast of six analysts polled by Reuters although oil prices, which rose to fresh 21-year highs on Friday, cloud the outlook.
Wall Street's poor performance could weigh on the Hong Kong bourse on Monday after US stocks closed at their lowest levels of the year on Friday. Weaker-than-expected unemployment data stirred fears about the economic recovery.
Chinese chip maker CSMC Technologies Corp will debut on Friday after a troubled initial public offering. It raised HK$310.5 million, sources said, half of the original target after an initial listing plan was scrapped in June due to concerns about valuation. Its shares were priced at HK$0.5, the bottom end of a range, and the stock will debut under the symbol.
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