'The [decline in the US] dollar is an ongoing process. The money chasing that theme is already here,' DBS Vickers head of Hong Kong research Trevor Cheung said. Investors may be looking for places other than top index stocks to park some of that cash as the market was consolidating, he suggested.

A broker said HSBC continued to be capped by the negative news on Household International, which also brought profit-taking on some property counters, referring to Sun Hung Kai Properties and Cheung Kong, which gave up early gains to finish flat. A 0.38 per cent drop in HSBC to $132.50 cut 17.9 points off the Hang Seng Index.

Mainland counters took a bigger hit on speculation that authorities may raise interest rates further. The H-share index lost 27.47 points to 4,843.72 as 19 of its members, mainly power companies and petrochemical stocks, that are generally highly geared, fell while nine closed flat.

Datang International Power and Sinopec Zhenhai Refinery both led the H-share fallers, losing 3.01 per cent to $6.45 and $8.05 respectively. China Resources Enterprise fell 5.9 per cent to $11.05 after announcing disappointing third-quarter earnings, its biggest one-day drop in five months.

Both the blue-chip and H-share indices edged up marginally for the week, with the Hang Seng Index 3.22 points higher while the H-share index gained 12.63.

Market turnover shrank to $16.47 billion yesterday amid declines, from $19.05 billion on Thursday.

'On the one hand we still have money coming in, on the other valuations are a bit stretched and I cannot see any catalysts on the fundamental side. But investors are still looking for returns and the Hong Kong reit [real-estate investment trust] may be one outlet,' Mr Cheung said.

Thinking along the same lines, RBC Investment Services (Asia) director Sam Yu expected the Hong Kong market would remain weak in the near future as investors channelled funds into upcoming mega listings.

ZTE Corp's US$350 million H-share initial public offering, the Housing Authority's reit, estimated at about $22.5 billion and Air China's IPO of up to US$1 billion all begin their international roadshows next week.

Other observers believed the correction would be near-term.

One trader said the consolidation trend, which had been keeping the Hang Seng Index near 13,800, was similar to that in other Asian markets, including Japan, Taiwan and South Korea and projected it would be a short-term phenomenon.

'Hong Kong's economic fundamentals are still solid and there should be strong support [for the HSI] at around 13,600,' he said.

His view was shared by UOB Kay Hian Hong Kong director Steven Leung Wai-yuen, who believed the Hang Seng Index would break the 14,000-point level following this near-term weakness on profit taking and market consolidation.

Several property counters rose as investors sought laggards. Henderson Land Development rose 1.01 per cent to $40.10 while Wheelock gained 1.22 per cent to $12.40.

'Properties have been lagging behind at this round of the rally, it's just the time they're catching up again,' Mr Leung said, adding that there was still strong buying interest in the Hong Kong market.