Hong Kong shares could get an initial boost on carry-over sentiment from Friday's strong US jobs data, but traders will scan the US Federal Reserve chief's comments for clues to the timing of a possible interest rate rise.
The return of IPO activities this week may also support market sentiment.
"The market will be volatile this week with most investors adopting a wait-and-see approach," said Steve Kwok, a director at Avanta Investment. "There are too many uncertainties."
US Federal Reserve chairman Alan Greenspan has speaking engagements this week on Tuesday and Thursday, ahead of a Fed meeting on June 29-30, when the central bank is widely expected to lift interest rates from four-decade lows.
Since the Hong Kong dollar is pegged to the US dollar, if the US lifts interest rate, Hong Kong will likely have to follow suit to keep a stabilised currency.
The Hong Kong market is expected to rise in early trade Monday in response to the strong US jobs report on Friday. US employers added 248,000 jobs in May.
On Friday, the Dow Jones industrial average rose 0.46 percent while the tech-laden Nasdaq Composite Index added 0.94 percent.
The blue chip Hang Seng Index ended up 0.78 percent, or 92.71 points at 12,022.64 on Friday, marking a 0.78 percent fall on the week.
Traders expected the index to hover between 11,800 and 12,000 this week, seeking strong support at 11,500.
"Hong Kong stocks need further consolidation, but the downside is limited because investors who missed the previous rally are expected to buy on dips," said Steven Leung, director of institutional sales of UOB Kay Hian hong Kong Ltd.
IPOS EYED: The market will be eager to know whether investors' appetite for China's IPO have returned.
China's biggest liquid milk producer, China Mengniu Dairy, which was more than 200 times oversubscribed in the retail portion, will begin trading on Thursday.
Mengniu, which was priced at HK $3.925, raised US $176 million in an IPO, the top end of expectations due to improved sentiment for China shares.
Individual investors are also applying for shares in China Shipping Container Lines Co Ltd, the world's No 10 container line, which is planning to raise up to US $1.3 billion.
Mini-motor maker Johnson Electric Holdings Ltd, which is due on Monday to report its full-year results ending March, will also be in focus.
Analysts expected Johnson, the third-worst performing stock among the Hang Seng, to have earned US $34.46 million for its fiscal second-half, based on Reuters calculations.
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