Hong Kong shares rose on Tuesday, with locally listed Chinese stocks climbing for the first time in 10 days, as hopes of continued ultra-loose monetary policies in the United States spurred short-covering and offset concerns over corporate results.

The move was a reprieve for a Hong Kong market that has seen its 2012 rally stall and trading volumes flag, with sluggish corporate earnings and worries about China's slowing growth putting investors on the backfoot since late February.

The Hang Seng index advanced 1.8 percent amid a mild pick-up in volume, bringing its gains for the first quarter to 14 percent. If those hold, the benchmark will have had its best start to a year in 19 years, despite recent weakness.

Financials led the rebound, with index heavyweight HSBC Holdings up 2.3 percent.

Hong Kong property developers, already among the top performers this year, extended Monday's gains. Sun Hung Kai Property, Asia's top developer by market value, rose 4.1 percent.

The mood remained cautious on mainland China, however, where the benchmark Shanghai Composite fell 0.2 percent to its lowest close in six weeks, further eroding gains since the start of the year on worries over profits.

China's industrial firms suffered a rare annual drop in earnings in the first two months of 2012, mainly in the petrochemical, metals and auto sectors, the latest sign of weakening momentum in the world's No. 2 economy.

Retail investors are waiting for fresh catalysts to emerge since earnings haven't been fantastic. The awful turnover is a big drag, but at least it picked up today for the first time in seven days, said Zhang Qi, a Shanghai-based equity analyst with Haitong Securities.

Recent winners such Kweichow Moutai were hit by profit-taking. Shares of the liquor firm slid 6.4 percent after touching a 7-1/2-month closing high on Monday.

SHORT-COVER, QUARTER-END

While concern over the sustainability of this year's rally in riskier assets remains, traders attributed some of the day's gains in Hong Kong to 'window-dressing', where portfolio managers buy outperformers and sell laggards.

Coming into the end of one of the best quarters for the markets in years, you would expect that there could maybe be a little reversal of the current selloff and we should see some window dressing to give us a good month- and quarter-end close, said a Hong Kong-based trader at a European brokerage.

Real estate companies such as Evergrande and Poly (HK) Investments were possible candidates for short-term moves higher based on quarter-end buying, said the trader, given their performance this year and relatively healthy earnings.

Evergrande shares surged 7.7 percent on Tuesday, taking its gains to more than 35 percent so far this year, with full-year earnings due on Wednesday. The company has forecast profit will significantly increase from 2010.

Beyond next week, however, market direction remains unclear, with fear of further fundraising from China corporates, particularly banks, likely to keep gains in check.

Shares of China Minsheng Banking Corp Ltd fell 1.7 percent after the mid-sized lender priced a $1.44 billion share offering in a capital-raising deal to boost its balance sheet.

China Life shares rose 2.7 percent, largely on short-covering, despite the firm reporting a poor set of 2011 results, with profits slumping 45.5 percent.

A quarter of the day's turnover in China Life shares in Hong Kong on Monday was related to short-selling, according to data from the stock exchange. Short-interest hit 40.1 percent last Wednesday, the highest this year.

Credit Suisse maintained its neutral rating on China's largest insurer, saying that while the results were weak the growth in the value of new business was better than the brokerage's expectations.