Look for Hong Kong stocks to test higher ground this week on the back of excitement over red chips and continued buying of laggard blue chips. BNP PrimeEast sales director Allen Chang said: 'Momentum is quite good at the moment, this is likely to continue.' He said futures contracts were performing as strongly as the cash market, which was not the case earlier in the rally. The high point of the week could come on Thursday when hugely popular red chip Beijing Enterprises makes its big debut. The Hang Seng Index gained 269.31 points, or 1.91 per cent, last week. It soared to a record intra-day high of 14,398.55 points on Wednesday and set a record close of 14,331.68 on Friday. Sentiment should be strong when the market opens this morning on news that the Dow Jones Industrial Average in New York rose 87.78 points to a record close of 7,345.91 on Friday. A possible weak spot is US 30-year Treasury bonds, the yield on which has been edging higher towards the 7 per cent level over the past few days. Investors across Hong Kong will feel their pulse quicken on Thursday when Beijing Enterprises begins trade. The conglomerate, which is controlled by the Beijing municipal government, has interests in restaurants, brewing, toll roads, hotels and retailing. The stock is expected to soar with the grey market price quoted as high as $40 on Friday compared with an issue price of $12.48. Handbag and cardboard maker Lee & Man is also due to make its market debut on Wednesday. The induction of Beijing Enterprises into the market is also expected to boost turnover as money tied up in the subscription is returned to unsuccessful applicants. The offering was subscribed by as much as 1,000 times. GK Goh Securities institutional sales vice-president Kierran Hung said: 'A good proportion of that will come back in the market. If that is the case, 15,000 is not too far off.' Much of that money should find its way into red-chip stocks, helping to continue their spectacular rally. Brokers also said the Chinese Government appears to be allowing a greater flow of investor money into the territory ahead of the handover. South China Brokerage director Howard Gorges said: 'Red chips will remain fashionable through the handover.' There is also likely to be continued rotation into laggard blue chips and second- and third-liners. Two stocks mentioned by brokers are Hongkong Telecom and China Light & Power. Mr Gorges said: 'Watch property stocks, they have lagged. A lot of second-liners with strong fundamentals have not done much lately, some of them should come to life.' With so much optimism and only a limited amount of good news, many brokers are warning that the market is becoming overstretched.