Hong Kong shares rose on Monday as Greek passage of an austerity bill liftedappetites for risky assets in Asia, although underperformance in Chinese developers due to concern their 2012 rally has been overdone led Shanghai to close flat.

Greece approved the deeply unpopular austerity bill to help secure a second bailout, even as riots in central Athens and violence across the country raised doubts about implementation of the approved spending cuts.

Asian markets posted modest gains on the news, extending their bright start to the year. However, turnover declined from last week, suggesting that some players were cautious about chasing the rally further.

The Hang Seng Index rose 0.5 percent on Monday, taking its gain this year to 13.3 percent.

On Monday, the HSI ended at 20,887.4, held below the 21,000 level at which it faltered four times last week and which is the index's current 250-day moving average.

We are about to enter reporting season in earnest, which will be the key to breaking above 21,000, said a Hong Kong-based trader at an American brokerage.

Short-selling picked up in the morning session as the index approached 21,000 as traders bet that the stiff resistance will hold again. Short-selling rose to 8.3 percent of total turnover in the morning session on the Hong Kong exchange, markedly higher than the prior week.

Chinese companies are due to report full-year 2011 results later this month and in March. So far, investors have shown little tolerance for profit-warnings, underscoring their skittishness despite healthy stock gains this year.

In the latest such move, China Yurun Food Group, which warned of a steep profit decline, lost more than 20 percent of its market value on Monday. That wiped out two-thirds of the gains since mid-December.

But gains in Chinese banks, which carry the biggest weight as a group on Hong Kong's benchmark, helped offset those losses, with China Construction Bank Corp up 1.3 percent.

Comments by Premier Wen Jiabao in state media that China will start to fine-tune economic policies in the first quarter probably helped financials on the day, traders said.

Banks also recovered from early losses in Shanghai, helping the benchmark Shanghai Composite Index to reverse an early 1.7 percent fall and close flat.

PROPERTY TAKES A STEP BACK

Chinese real estate companies were on the backfoot after reports that the city of Wuhu in Anhui province had rolled back housing subsidies announced just last week.

The move was taken by traders and analysts to mean that Beijing was not going to loosen its stance on property prices any time soon despite selective easing in other areas of the economy under duress such as small and medium enterprises.

Hopes that China would take a step back from its aggressive stance to rein in property prices have fueled a rally in real estate stocks over the past five weeks despite weakening sales numbers.

It's a bit of a tug of war between those who think the rally is too sharp and those who have not bought into the sector, said CLSA Asia-Pacific Markets property analyst Nicole Wong.

The sharp rally in the sector after a dismal 2011 has seen shares of Evergrande Real Estate Group Ltd more than double from their lows last October.

On Monday, Evergrande lost 6.9 percent. Larger rivals China Overseas Land & Investment Ltd fell 4.8 percent and China Resources Land Ltd dropped 5.8 percent.

In Shanghai, Poly Real Estate (Group) Co Ltd slipped 3.1 percent, while Shenzen-listed China Vanke Co Ltd fell 1.9 percent.

The Shanghai property sub-index fell 1.76 percent on the day, cutting its year-to-date gains to 6.9 percent.

In Hong Kong, the sub-index of property stocks is up 14.6 percent this year, more than one percentage point better than the broader Hang Seng.