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Hong Kong stocks close 0.21% higher

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Hong Kong stocks have risen rose 0.21 per cent, reversing earlier losses on bargain hunting, but traders remain concerned about a liquidity crisis in China’s banking system.

The benchmark Hang Seng Index on Tuesday ended 41.74 points higher at 19,855.72 on a turnover of HK$92.87 billion ($A13.02 billion).

The morning trade began positively as investors bought recently-battered property shares, but the early gains were knocked out by widespread selling pressure in China which tipped most Asian markets into the red.

As Shanghai began to recover, so too did Hong Kong with traders saying confidence was renewed by rumours that government-related funds were suspected of buying heavyweight bank stocks in the mainland to help revive investor confidence.

Hao Hong, managing director for research at Bank of Communications International, told the Dow Jones newswires that investors also took heart after a turbulent fortnight from an afternoon meeting convening the People’s Bank of China and state banking, securities and insurance regulators.

“We are down almost 20 per cent in two weeks,” Mr. Hong said. “It’s ferocious.”

Property shares in Hong Kong closed the session with the strongest gains, rising 1.3 per cent. Henderson Land rose 1.9 per cent to $HK45.25 and Hang Lung Properties rose 2.6 per cent to $HK26.15.

Bank of East Asia, a major Hong Kong bank, closed down 1.28 per cent to $HK26.90 while local stock exchange operator HKEX lost 1.55 per cent to $HK114.10.

In China, shares closed down 0.19 per cent, their lowest level in more than four years amid persistent worries over a domestic liquidity squeeze, dealers said.

The benchmark Shanghai Composite Index ended down 3.73 points at 1,959.51 on turnover of 104.7 billion yuan ($A18.47 billion). The close was the lowest since January 16, 2009.

Brokerages were hardest hit on Tuesday, with China Everbright Securities losing 4.23 per cent to 9.74 yuan and Industrial Securities falling 3.09 per cent to 9.09 yuan.

Cement producers also fell, with Zhejiang Jianfeng Group dropping 4.07 per cent to 8.72 yuan and Shaanxi Qinling Cement falling 2.57 per cent to 4.17 yuan.

But banking shares rebounded after earlier losses. Industrial and Commercial Bank of China rose 1.54 per cent to 3.96 yuan and Agricultural Bank of China climbed 1.21 per cent to 2.51 yuan.