HONG KONG shares should start a new week on a positive note tomorrow after rising 8.3 per cent last week amid softening local interest rates and new highs on Wall Street. The benchmark Hang Seng Index rose 880.9 points last week, ending on a high last seen in early December. Traders said the stock market could enjoy further modest gains with anticipation of a cut to banks' prime rates in the next few weeks as long as declines in Hong Kong interbank offered rates (Hibor) could hold and Wall Street remained strong. Merrill Lynch research head Adrian Faure predicted the market could overshoot fair value of about 12,000 points by 500 points in the short-term. 'There has been positive news on interest rates and demand for property but I don't think it is sustainable,' he said. Last week interbank rates fell to four-month lows as regional currencies were seen to stabilise and there were rumours of money-market intervention by the Hong Kong Monetary Authority. The authority later denied it had been pumping liquidity into markets to help ease rates. The week was dominated by solid results from HSBC Holdings, the parent of Hongkong Bank and Hang Seng Bank. On Monday, it announced a 10 per cent increase in group pre-tax results to GBP4.9 billion (about HK$62.46 billion). However, reflecting the uncertainties of Asia's economic outlook, the bank said it was raising provisions for bad and doubtful debts by GBP231 million to GBP615 million. Trading in HSBC shares inspired the market. For the week, HSBC shares jumped 12 per cent to finish at HK$224 - - an impressive 35 per cent increase since January 26. After closing 85.42 points, or 0.8 per cent, higher on Monday, the Hang Seng Index paused on Tuesday and Wednesday, before rallying strongly through the rest of the week. On Wednesday, the index jumped 1.9 per cent, followed by a 3.1 per cent burst on Thursday and then a 2.28 per cent increase on Friday. Following HSBC's lead, first smaller banks and then property counters cashed in on the falling interbank rates. Experts correctly predicted no change to prime rates would come out of the Hong Kong Association of Banks' Friday meeting but were forecasting a cut to the prime rate as long as interbank rates stayed at present levels. Average daily turnover was $10.92 billion compared with $8.73 billion the previous week, as cashed-up investors were said to have been lured back to the Hong Kong stock market by HSBC's results. Mainland stocks also performed well ahead of this week's meeting of the National People's Congress in Beijing. The red-chip index climbed 14.49 per cent to finish at 1,775.09 and the H-share index ended the week at 719.28, a gain of 14.75 per cent. Investors hope the gathering could be used to unveil a cut to mainland interest rates aimed at lifting the fortunes of debt-ridden state-owned enterprises.