The world number one faces an unexpectedly tough group before a likely match-up with his arch-rival, Rafael Nadal, or the in-form Nikolay Davydenko in the latter stages.

Federer opens the tournament on Sunday against sometime-nemesis David Nalbandian, who rallied from two sets down against the injured Swiss to win last year's epic final.

He will also face Ivan Ljubicic, the world leader in indoor wins this season, and the big-serving Andy Roddick in the Red Group round-robin.

While Federer cruised through an injury-ravaged field to the 2005 final, this year's competition is shaping up to be one of his toughest challenges.

However few would bet against the 2003 and 2004 champion, who has only lost twice in four Masters Cup campaigns and has declared himself in impeccable shape after sitting out last week's Paris Masters.

"I came to Shanghai last year with injuries, but I have 100 percent confidence in my health situation this year," he said.

"Fitness-wise, I am perfect. There are no concerns over ankles, knees and so on after such a demanding season. I just can't wait to hit the first ball on the court."

Federer will be keen to make amends for last year, when the battling defeat to Nalbandian not only cost him a Masters Cup hat-trick but saw him fall one short of John McEnroe's 1984 season record of 82-3.

He arrives here after another incredible year, winning 11 titles, including three Grand Slams, to take his career haul to 44, and losing just five matches in 92.

Nalbandian has a strong record against Federer, beating him six times in 13 meetings. However he has lost three semi-finals to the Swiss this year, including in straight sets at last month's Madrid Masters.

Ljubicic has not won against Federer in three years but has taken him the distance several times, including to three tie-breakers in the Miami final.

Roddick will be hoping to spring a surprise under the tutelage of advisor Jimmy Connors, after taking a set off Federer in the US Open final.

Federer will be wary of Russia's Davydenko, newly elevated to world number three after 67 wins this season including the Paris final.

But a major question-mark hovers over the heavy-hitting Rafael Nadal, who dominated the Swiss early in the season but whose form has evaporated since he lost the Wimbledon final.

However, the 20-year-old said he has recovered from an abdominal problem that kept him away from Paris and is highly motivated for his Masters Cup debut.

"I feel okay. I was practising very hard last month and I arrive in Shanghai with my best motivation," Nadal said.

The Spaniard won four finals against Federer, including the French Open, on his way to five titles in the early part of the season. But his biggest scalp since Wimbledon has been 13th-ranked Tommy Haas in Madrid.

Gold Group brackets Nadal and Davydenko with James Blake and Tommy Robredo, who are also playing the competition for the first time after breaking into the top 10 this season.

Shanghai organisers will be hoping for better luck than last year when injuries robbed the tournament of Nadal, Roddick, Andre Agassi, Lleyton Hewitt and Marat Safin.

They will also want to put on a good show with tennis chiefs keen to move the elite tournament to Europe in 2009.

Shanghai is also contracted to host next year's tournament with an option for a further edition in 2009.

However, last year's pull-outs drew bitter complaints from officials here who splashed out 200 million dollars on the state-of-the-art Qi Zhong Stadium complex.

Red Group
Roger Federer (SUI), Ivan Ljubicic (CRO), Andy Roddick (USA), David Nalbandian (ARG)

Gold Group
Rafael Nadal (ESP), Nikolay Davydenko (RUS), Tommy Robredo (ESP), James Blake (USA)