Hong Kong shares edged higher on Tuesday, lifted by property stocks on signs of a stabilising real estate market, while weak banks dragged China's benchmark indexes lower.

Turnover in both markets declined from Monday, suggesting that investors remain cautious because of worries over Greece and were seeking fresh clues on whether the benchmark indexes will extend this year's gains .

The Hang Seng Index rose 0.2 percent to 20,917, shy of 21,000 or the benchmark's current 250-day moving average at which it has faltered four times last week. The Hang Seng has added 13.5 percent this year.

The Shanghai Composite Index fell 0.3 percent, dragged by banks stocks after China's pension fund sold about $20 million worth of H-shares of two of the biggest mainland lenders.

Nomura analysts said in a report dated Tuesday they are very bullish on Hong Kong property stocks, adding that the territory's effective property supply is even lower than they thought and this could allow the housing and office market to re-engage at a much faster than expected pace.

Henderson Land jumped 6 percent, while Sun Hung Kai Properties Ltd jumped 3.6 percent, closing at its highest since Aug. 4 last year, becoming the top boost on the Hang Seng Index.

Local media reported signs of the territory's mortgage market regaining some stability. Bank of China (Hong Kong) and HSBC Holdings Plc reportedly cut their mortgage rates last week, while loan repayments has outpaced increases in new loans.

However, gains for Sun Hung Kai came amid significant shorting interest, a trader in the territory said, suggesting segments of the market remained bearish.

Turnover in Hong Kong was the lowest since Jan. 16. At HK$55.9 billion, it is marginally lower than Monday's level and about 38 percent lower than Feb. 2, which was the highest turnover in the year to date.

It's difficult and too early to say whether we are heading downwards from here. The upcoming earnings season is key, said Jackson Wong, vice-president of equity sales at Tanrich Securities.

We are coming to the end of earnings downgrades and there might be still some more profit warnings ahead, but lower expectations will support the market, he added.

Among the first Hang Seng Index member companies to post full-year earnings, Bank of East Asia Ltd reported wider losses, missing the street forecasts. It ended down 2.8 percent at its lowest since Jan. 19.

Its largest shareholder, Caixabank was among the banks in Moody's downgrade of Spain, Portugal, Italy, Slovakia, Slovenia and Malta.

In a possible gauge of market sentiment, Canadian oil explorer Sunshine Oilsands Ltd has set a price range for a proposed Hong Kong initial public offering of up to $700 million, the biggest IPO so far this year in the Asian financial hub, according to a term sheet of the deal seen by Reuters on Tuesday.

FINANCIALS WEIGH IN SHANGHAI

In Shanghai, Industrial and Commercial Bank of China (ICBC) and Bank of China lost 0.5 and 0.3 percent respectively and were among the top drags on the benchmark.

Both lenders said late on Monday that China's national pension fund sold about HK$153 million ($20 million) worth of Industrial and Commercial Bank of China (ICBC) and Bank of China 3988.HK shares in Hong Kong.

Investors remained wary despite mainland media reporting on Tuesday that China's bank regulator may relax new capital adequacy requirements due to take effect this year in order to reduce pressure on bank balance sheets.

Insurers were weak after reporting January premiums, with China Pacific Insurance (Group) Co Ltd (CPIC) among the harder hit, losing 2.7 percent.

CPIC reported a 4 percent premium growth in January, year on year -- a figure that lagged rivals Ping An Insurance and China Taiping.

The Shanghai Composite Index finished at 2,344.8 on Tuesday, after trading in a tight 20-point range on the day and finishing shy of its 100-day moving average, seen at 2,355.8.