Although the Hong Kong stock market retreated 0.46 percent on Monday, it still stood firmly above 28,000 points after the city's benchmark stock index gauge last week soared to the highest level of the past three years, citing the city's strong economic fundamentals and other positive factors.

On Monday, the city's Hang Seng Index (HSI) slipped 131 points, or 0.46 percent, to 28,326 points. Despite the fact that the city's equity market only had three trading days last week due to the National Day and Mid-Autumn Festival holidays, the HSI rallied to close at above 28,000 points, the highest level recorded since April 2015.

Bullish factors pushing up the HSI last week included the global risk-on sentiment amid US tax reform optimism, the mainland's rosy purchasing managers index data and the country's central bank decision on Sept 30 to cut the reserve requirement ratio (RRR) for bank lending to small firms, startups, and rural borrowers to be implemented next year.

Under a macroeconomic backdrop, Hong Kong's economy in the second quarter grew 3.8 percent following notable growth of 4.3 percent in the first quarter on the back of revived exports to Asian markets and a strong property market.

"As the US Federal Reserve is set to reduce its balance sheet at a gradual rate while the European Central Bank and Bank of Japan may continue their quantitative easing (QE) plans, we expect global liquidity to remain flushed in the coming year," predicted Carie Li, an economist at OCBC Wing Hang Bank, the subsidiary of Singaporean-based lender OCBC Bank in Hong Kong.

"With the sustained southbound equity flows under Hong Kong's two direct stock market trading link programs with the mainland, we see little chance of a sharp fall in the (Hong Kong) stock market," Li continued.

However, some other equity analysts are more cautious, saying other macroeconomic uncertainties may serve as brakes on further stock rally.

"The People Bank's of China's decision to cut the RRR last month does not represent any significant changes in monetary policy so that the effect on Hong Kong's stock market should be lessened," cautioned Qiu Zhicheng, an equity analyst at ICBC International, the security research arm of the Industrial and Commercial Bank of China. "Therefore, if the US dollar and US interest rates still remain in the present upward trajectory, it will increase the downward pressure on the Hong Kong stock market."

The sizzling Hong Kong property market is also one of the radar factors that needs to be monitored, according to Chay Kai Kong, senior portfolio manager at Manulife Asset Management, the wealth management business arm of the Canadian insurer Manulife Financial Corporation.

"Hong Kong's property market has long been characterized by robust demand outstripping supply. As a result, the market has posted significant gains, locking out some participants," Chay said.