Hong Kong shares are expected to open firmer on Wednesday as a drop in oil prices should help ease inflation worries, prompting buying of fuel-sensitive airline and oil refining stocks.

A perceived decline in U.S. demand and worries subsiding that a storm would disrupt production in the Gulf of Mexico sent light, sweet crude for August delivery plunging more than $5 in afternoon trading before settling down $3.09 to $127.95 a barrel on the New York Mercantile Exchange.

That's nearly $20 down from its record high of $147.27 reached in recent weeks.

"The market may test the 23,000 level soon because of falling oil prices," said Francis Lun, general manager at Fulbright Securities. "That should impact on local trade more than the sad earnings reports from U.S. companies."

On Tuesday, the Hang Seng closed down 5.42 points at 22,527.48, as investors opted to stay on the sidelines after disappointing results from American Express and other companies.

Stocks to watch include Cathay Pacific and China Petroleum and Chemical Corp (Sinopec), Shanghai Industrial Holdings, and Citic Resources.

Shanghai Industiral Holdings may be active on news it is buying a hotel and toll road assets from its parent worth HK$5.55 billion. The assets included an 87 percent stake in Shanghai Four Seasons hotels and the Shanghai section of the Hun-Hang Expressway, the company said in a statement.

The investment holding company will pay HK$2.6 billion in cash and HK$2.95 billion in shares.

Citic Resources Holdings, the resource unit of China's Citic Group, will also be in focus after its first-half output from its mainstay oil field in Kazhakhstan fell short of expectations.

The oil field produced about 34,887 barrels a day, lower than the company's target of about 40,000 barrels, said Citigroup analyst Howard Pang, who kept his call on the stock at "sell".

Airline stocks including Cathay Pacific Airways and China Southern Airlines are likely to rise after oil prices fell, along with Sinopec.