Chinese shares rose on Tuesday on decent volume suggesting further strength ahead, while markets in Hong Kong struggled to hold gains under pressure from a near 5 percent slide in heavyweight HSBC.
The Shanghai Composite .SSEC, Asia's top performing benchmark in February, was up 0.6 percent at its day high by the midday trading break as attractive valuations after persistent underperformance last year encouraged investors.
Gains on the mainland helped shares of Chinese firms listed in Hong Kong .HSCE, particularly in sectors such as cement and construction, that are poised to benefit from plans to boost affordable housing.
The China Enterprise Index .HSCE rose 0.8 percent outperforming the benchmark Hang Seng index's .HSI mild 0.1 percent rise.
Analysts said investors in China were getting more optimistic about the market's outlook and pulling money out of physical real estate and shifting funds to equities instead.
A slew of property tightening measures, including raising down payments and mortgage rates and limiting the number of homes that one family can buy, has chased investors into the A share market, said Cao Xuefeng, head of research at Huaxi Securities in Chengdu.
Energy firms led by Panjiang Coal, up 6.0 percent, also jumped after official and unofficial purchasing managers' indexes in China both showed manufacturing activity continued to expand in February. The sub-index for factory input prices rose to a three-month high.
HSBC DRAGS HK
A tepid earnings report from banking giant HSBC Holdings hit its shares which had seen heavy buying interest in the run-up to the results, sending them as much as 5.1 percent lower to a one-month low.
Traders at a large U.S. investment bank said retail investors, who had taken sizeable exposure in the stock as it significantly outperformed the broader market since the start of the year, dumped warrants.
The stock's slide, its sharpest in exactly a year, wiped out about $10 billion in market value.
The broader market managed to hold on to gains despite HSBC's slide as property developers rose after industry bellwether Sun Hung Kai Properties, Asia's biggest developer by market value, reported a 60 percent surge in first-half profit.
Rival Cheung Kong Holdings, controlled by billionaire Li Ka-shing and said to be planning Hong Kong's first yuan-denominated share offering, was up 2.9 percent.
Also higher were shares of China Mobile, the telecom giant which has underperformed its rivals China Unicom and China Telecom this year.
China Mobile rose 2 percent on the day and was the biggest boost to the broader market. This year its shares are down 3.5 percent compared with a 20.3 percent gain for Unicom and a 12.5 percent advance for China Telecom.