Hong Kong stocks could be vulnerable this week to a reversal in the weak US dollar, but corporate results may provide some support as investors also gauge demand for China initial public offerings.
The US dollar jumped to two-month highs against the yen on Friday after languishing at multi-year lows versus major currencies.
"The weak US dollar has been the key driving factor for the strength of the market. We could be locked in a trading range," said Daniel Poon, head of Hong Kong and China equities at ABN Amro Asia Ltd.
As the Hong Kong dollar is pegged to the US currency, it had made local equities cheap for foreign investors who have been pouring money into Hong Kong and China plays.
The blue chip Hang Seng Index gained 0.94 percent last week to 13,868.37 points and hit a two-and-a-half-year high just short of 14,000, a level traders said was providing strong technical resistance.
US blue chips, which the Hong Kong market closely tracks, lost ground over the week. The Dow Jones Industrial Average fell 45.70 points to 10,619.03 on Friday, shedding 0.08 percent over the week.
But a slew of Hong Kong corporate results may provide some impetus.
Annual results due include Wing Lung Bank Ltd, property groups Hong Kong Land and Hopewell Holdings, utility company CLP Holdings and China textile maker Weiqiao Textile Co Ltd.
Upcoming initial public offerings will take centre stage as investors gauge the global appetite for China plays.
China semiconductor firm SMIC kicks off a two week global road-show on Monday to pitch an IPO worth up to US $1.5 billion.
Trade in the semiconductor group is due to begin in New York on March 17 and in Hong Kong the following day.
The order book for steel-maker China Oriental Group closes on Monday after institutional investors subscribed for 11 times the shares on offer, according to sources familiar with the deal.
The company could raise up to HK $1.925 billion ($247 million) and begins Hong Kong trade on March 2.
"These new issues will attract new funds. The upcoming IPOs will be medium and large cap stocks so that will attract investors," said Conita Hung, director of Delta Asia Financial Group.
China companies are expected to raise up to US $15 billion this year after a host of successful listings in 2003.