China shares rose for a third day while the benchmark in Hong Kong, which reopened on Tuesday after a holiday, was Asia's top performer, spurred by hopes of more monetary easing by the European Central Bank to revive economic growth.

The Hang Seng index rose 1.5 percent to finish at 19,735.5, its highest close since May 15. The benchmark managed to close above its 200-day moving average, currently at 19,554.8, which proved stiff resistance last month.

On the mainland, the CSI300 and the Shanghai Composite both rose 0.1 percent as persistent weakness in industrials cut into gains from property and consumption-related sectors.

In Hong Kong, many shares rose in hefty volumes in the first hour of trading after the holiday weekend. This was partly rooted in short-covering by investors who had carried forward positions from Friday but covered as the market played catch up.

At midday, the HSI was up 1.6 percent, and in the afternoon, there were few catalysts to trigger fresh buying.

This week is likely to be choppy with ECB & BoE meeting and the US Payrolls on Friday. We are again seeing 'bad news is good news' as it increases the potential that central banks will embark on new quantitative easing, a trader said.

Tom Kaan, a director at Louis Capital Markets in Hong Kong, said that when the Hong Kong market resumed trading on Tuesday, it benefited from some post-EU summit fervour as well as expectations that the ECB is going to follow through on Thursday by cutting interest rates.

China is still a bit of a mixed bag but as long as central banks are veering towards money-printing, there's going to be support for the market, said Kaan.

A contraction in U.S. manufacturing activity, the first in three years, underscored the grim outlook for the global economy but also raised hopes that the U.S. Federal Reserve will step in with asset purchases to support the economy.

Those expectations were seen helping risky assets with large-caps and beaten down commodity sectors such as coal and steel posting healthy gains.

HSBC Holdings and China Mobile, which both rose more than 1 percent, were the top boosts for the Hong Kong benchmark. AIA rose 3.2 percent following the company's sale of a part of its stake in Thailand's largest convenience store chain.

Coal stocks, which have been hit by weaker demand and worries about oversupply, staged a sharp recovery with the largest players China Shenhua and China Coal both rising more than 4 percent. Yanzhou Coal gained 5.8 percent bouncing off last Friday's 2-1/2 year intraday low.

CHINA AUTOS, INDUSTRIALS WEAK

China's industrial sector remained weak on mainland bourses after a private survey of manufacturers showed factory activity shrinking at its fastest pace in seven months as exports orders tumbled to depths last seen in March 2009.

Heavy equipment maker Zoomlion fell 3.2 percent while rival Sany Heavy fell 3.3 percent. Dongfang Electric dropped 3.6 percent.

Auto stocks in Hong Kong were stark underperformers as offshore investors reacted to reports on Monday in local Chinese media that Guangzhou became China's fourth city to cap on annual car sales to help ease a worsening traffic gridlock.

Brilliance Automotive dropped 1.9 percent while Dongfeng Group fell 4.4 percent. GAC Group fell 4 percent. BYD fell 1.1 percent while its Shenzhen listing fell a further 2.2 percent.

Other China consumption-related sectors were stronger, however, after brokerage JPMorgan said the valuations for consumer discretionary sector were already reflecting a weak operating environment and any second-half improvement would likely support shares prices.

Other China consumption-related sectors were stronger, however, after brokerage JPMorgan said the valuations for companies making non-essential consumer goods were already reflecting a weak operating environment and any second-half improvement would likely support shares prices.

Excluding sportswear makers, the Chinese consumer discretionary sector trades at a compelling 12 times forward-earnings multiple, according to JPMorgan, which prefers the sector over consumer staples.

Golden Eagle and Lifestyle International , both of which were upgraded to overweight at the broker, rose 5.3 percent and 4.1 percent respectively.