THE Hang Seng Index is set for new heights this week, needing only a repeat of Friday's surge to push it into record territory. The reasons for optimism are varied, with hopes of a Sino-British political breakthrough, announcement of good profits figures, a tidal wave of US cash and other reasons cited by analysts as triggers for a rise. The week also will see the start of options trading in Hongkong. The index rose 2.4 per cent on Friday to close at 6,351.99, just 1.5 per cent short of its record level, with dealers saying the surge has been made more remarkable by its timing. Over the past few months the market has performed badly on Fridays, with investors afraid to hold shares over the weekend. Of five predictions gathered at the close of trading on Friday, only Mr Archie Hart, research director at Crosby Securities, was wary, saying political considerations had put a ceiling on the market. ''It has reached this level before, and what sent it down hasn't gone away,'' he noted. Elsewhere, however, the mood was buoyed by the afternoon's trade in particular, during which trade worth $2.44 billion sent the index up one per cent in an hour. Generally the mood seemed to be one of strong optimism that the record would be rewritten if there were no further outbreak of hostilities between London and Beijing. But Mr Richard Witts, managing director of United Mok Ying Kie, was prepared to go further than any, refusing to add any word of caution to his prediction that the market would go through its previous record close, this week. ''I don't think China is going to release anything new this week,'' he said. The record close of 6,447.11 and the intra-day record of 6,470.83 were both set on November 12, before China's attitude to Governor Patten's electoral change proposals were fully understood by investors. In the plunge and rise since, there has been a re-balancing of share prices, with the recent surge less driven by the more volatile property stocks. Utilities have been marked up - with the sector index already into record territory, closing last week at 7,606.45. Property shares are still well below their highs, the index closing on Friday at 10,022.58, against a record high set in November of 10,417.09. But it is finance stocks that could hold the key to a record run. Expectations of good results and a generous dividend payout from Hang Seng Bank and the feed-through into HSBC Holdings are cited in the weekly bulletin from Mansion House. The finance index closed last week at 6,040.95, against the 6,041.16 close on November 12. The previous day HSBC Holdings had a placement, with chief executive John Gray saying at the time the bank had ''probably got the timing of this absolutely right''. Last Friday, the company's share price moved up to $65, the first time those who took $5.12 billion of shares at $64.46 had been given a chance to sell without loss. The price is therefore at a potential resistance point. Hang Seng Bank is already into new territory at its close of $63, against its highs in November last year of $59. Last week's climb was driven by property stocks, which had an average rise of 4.14 points, with New World leading the way, jumping six per cent to $19.40, up $1.10. The best-performing stock in the index was China Light and Power, which rose 6.5 per cent, $2.25, to $37. Hongkong and China Gas, boosted by its good profits and one-for-five bonus issue, rose 6.2 per cent, $1, to $17.20. Cathay Pacific, Hongkong Telecom and Winsor Industrial were the only index stocks to fall. Hongkong Telecom's slip of one per cent was because of downgrading of the stock in New York. It fell 10 cents to $10.10. Outside the index, Denway Investment ended its much-awaited first week at $2.225. With the one-for-five bonus warrants closing at $1.13, shareholders who paid $1.22 a share had a package worth $2.451. For those who did not borrow for their shares, the profit stood at 101 per cent. For leveraged investors the profit was nearer 20 per cent, taking into account the 80 cents a share borrowing costs. The start of options trading on Friday will be keenly watched, as it gives new tools for investors to manage or increase risk. Futures exchange chief executive Gary Knight has already described it as ''the most important investment vehicle to hit Hongkong in its history'', but two previous derivative markets, in sector index futures and commodities, have failed to generate interest. Two companies join the exchange on Wednesday, Kosonic International and Starlight Holdings. Lung Kee Holdings starts trade on Friday. Hang Seng Index: ''I'd like to hope so, but I don't think it will. There's a cap on the market.'' - Archie Hart, Research Director, Crosby Securities. ''It could easily do it. I wouldn't be surprised to see it establish a new high next week.'' - James Osborn, director,Baring Securities. ''The Hang Seng Index could go up to 6,500 should our expectations materialise and the support lies at 6,200.'' - Mansion House Research. ''Unless we get some negative news it will continue to rise. I'm fairly optimistic and I'm looking for 7,000 in the not too distant future.'' - Clive Weedon, research manager, Nomura Research Institute, Hongkong. ''There is a perception that things are happening behind the scenes and the market likes it. We're heading for a record high this week for sure.'' - Richard Witts, managing director, United Mok Ying Kie.