Hong Kong stocks look set to consolidate this week with sentiment over China's red hot economy seen dominating along with expectation of a rebound in local property shares.
"The market has hit its trough and next week should see a rebound to about 12,500. Property could be the market driver as home prices remain strong and a rate hike doesn't look to be imminent," said Simon Tam, a senior manager at Kim Eng Securities.
The blue chip Hang Seng Index ended last week on a high note, rising 1.78 percent to 12,383.94. Property stocks were a key driver as investors focus on brisk housing sales amid a broad-based economic upturn.
But worries that fund flows are moving away from the China region into other Asian markets such as Taiwan and Japan are likely to persist as investors worry about economic overheating in the mainland and take profit after steep rises in China plays.
Investment bank Merrill Lynch said in a research note that Japan last week was the main international destination for mutual funds it tracks, while the pace of flows to Asia countries outside Japan has slowed significantly.
The closely watched H-Share index of China-registered companies listed in Hong Kong jumped 4.35 percent to 4,504 on Friday, but still lost four percent in a tumultuous week of trade.
A senior US Treasury official said at the weekend G7 officials meeting in Washington recognised China's "critical" role in the global economy and saw the risk of an overheating Chinese economy as a danger for global expansion.
A pile of China first-quarter corporate results out over the week may also provide some signs of economic strength.
Sinopec Corp, Asia's largest refiner, which accounts for 13 percent of the weighting of the H-share index, is due to post earnings on Friday.
Other companies reporting include mobile carrier and Hang Seng component China Unicom Ltd, China's largest carrier China Southern Airlines Co Ltd and the country's largest listed coal producer, Yanzhou Coal Mining Co Ltd.
"Many China plays, such as petrochemical, selected steel makers and power, have single-digit price to earnings ratios which indicate good value," said Joseph Lau, a director at Tai Fook Asset Management.
Investors are also seen keeping an eye on the deadly Sars virus after two cases were confirmed in China.