(REUTERS) - Hong Kong shares started the new year stronger on Tuesday, with the Hang Seng Index rising 2.4 percent to its highest in almost three weeks, bolstered by strength in oil stocks and hopes that Beijing will take fresh steps to support China's cooling economy.

The Hang Seng Index closed at 18,877.4 points, the lower end of a 18,818-19,242 range that served as support for more than a week in early December. The index was one of the worst performing benchmarks in Asia in 2011, losing 20 percent.

The China Enterprises Index of top mainland listings in Hong Kong gained 3 percent on Tuesday.

Petrochemical companies will stay relatively strong on anticipated pricing mechanism changes. Strong volumes today, particularly for PetroChina, suggest fresh buying by funds, said Jackson Wong, vice-president for equity sales at Tanrich Securities.

Energy shares were boosted by surging oil prices amid growing tensions between Iran and the West.

Sentiment toward oil stocks was also lifted by a plan by China's National Development and Reform Commission (NDRC) to allow mainland oil prices to be dictated by the market, a move that could lift profits at the country's three oil majors, traders said.

PetroChina Co Ltd, CNOOC Ltd and China Petroleum & Chemical Corp (Sinopec) were among the top boosts on both benchmark indices. PetroChina gained 4.5 percent in volume that was more than its 30-day average volume.

In a note to clients, analysts from Daiwa Capital Markets upgraded PetroChina from underperform to hold while staying cautious, retaining their HK$9 12-month price target for the stock. PetroChina closed at HK$10.10.

According to Thomson Reuters Starmine, PetroChina is trading at a 6 percent discount from its 12-month earnings historic median and a forward price-to-book multiple that is a 23 percent discount off its historic median.

Financial markets in mainland China stayed closed on Tuesday for the New Year holiday. They will reopen on Wednesday.

Investors are also betting Beijing will offer fresh policy support early in the new year to offset the impact of the global economic slowdown.

China's big manufacturers narrowly avoided a contraction in December, a survey showed on Sunday, though a separate report on Tuesday showed activity in the services sector rebounded strongly.


Government announcements also drove several other big movers on the day.

Warren Buffett-backed Chinese auto-maker BYD Co Ltd surged 7.6 percent on Tuesday to hit its highest in three weeks. It dived 59 percent in 2011.

The Chinese finance ministry said on Sunday that it will waive sales taxes on electric and fuel cell cars made domestically by companies, in its latest initiative to shore up the country's fledgling green car market.

Mengniu Diary Co Ltd gained 5.7 percent in more than twice its 30-day average volume after China's quality watchdog said it had found no further cases of milk tainted by high levels of carcinogenic mildew in tests of products by major dairy producers..

Mengniu slumped 31 percent last week after its said its Sichuan plant had destroyed products found by a government quality watchdog to contain the cancer-causing substance aflatoxin.

Appliance makers also posted strong gains amid expectations that Beijing will aim to boost domestic consumption in 2012 to offset weaker exports.

Haier Electronics Group jumped 6.5 percent, while Gome Electrical Appliances Holdings Ltd surged almost 9 percent. Both stocks are coming off steep losses in 2011 of 23 and 36 percent respectively.

Baring Asset Management is one of a number of investors which is increasingly looking to the Chinese consumer sector.

In a note on Tuesday, Agnes Deng, investment manager for its Hong Kong-China fund, said she has trimmed positions in the luxury automobile sector and added industrial companies.

We are turning more positive on the resumption of government spending on fixed asset investments, Deng said in a press statement released on Tuesday.

As we head into 2012, our strategy will focus on companies where we have high conviction in their ability to deliver sustainable earnings growth in the coming years, especially companies with strong balance sheets and robust cash flows, she added.