Hong Kong stocks up 1.21% by close

Hong Kong shares closed 1.21 percent higher on Tuesday following gains in Japan and helped by growing optimism over the health of China's economy.

The benchmark Hang Seng Index gained 269.85 points to 22,541.13 on turnover of HK$72.86 billion (US$9.39 billion).

It was a second day of gains following better-than-expected industrial and inflation data out of China late last week that eased fears over the severity of the slowdown in the world's second-largest economy.

Investors also took their lead from Tokyo, which jumped 2.57 percent boosted by a weaker yen and reports that the government was reviewing a possible corporate tax rate cut.

But Edward Fung, head of investment advisory at Hong Kong-based brokerage Kim Eng, warned that Tuesday's action was more a "liquidity rally" rather than a shift in fundamental views of the market.

"If you look at the US market, it's directionless," he told the Dow Jones Newswires. "People are seeking quick return."

Investors are closely watching a string of data releases due this week from the United States including retail, housing and industrial production figures.

Property shares led advancers in Hong Kong Tuesday with a 1.8 percent gain, the sector's biggest one-day jump in three weeks.

Shares in Chinese residential property firm KWG, which reported a 49 percent jump in first-half profit, surged 8.9 percent to HK$5.00. Shimao Property shares climbed 4.9 percent to HK$18.50 and Country Garden rose 4.4 percent to HK$4.95.

Chinese shares ended up a more muted 0.23 percent, or 4.88 points, at 2,106.16 on turnover of 96.4 billion yuan ($15.7 billion) with investors taking a breather after Monday's strong gains, dealers said.

The benchmark Shanghai Composite Index edged up 4.88 points to 2,106.16 on turnover of 96.4 billion yuan ($15.7 billion). The index jumped 2.39 percent on Monday.

"The performance today is normal given the rise yesterday. But in the short term, the improvement in recent economic data will likely continue to boost market sentiment," Haitong Securities analyst Zhang Qi told AFP.

Cement and steel companies led the gains on media reports that local governments might boost infrastructure development.

Xinjiang Qingsong Building Materials surged by its 10 percent daily limit to 4.06 yuan while Anhui Conch Cement rose 2.28 percent to 16.61 yuan.

Fangda Special Steel Technology gained 5.36 percent to 3.93 yuan and Xinjiang Bayi Iron & Steel rose 2.58 percent to 4.38 yuan.

Financial shares were mixed. Industrial Bank jumped 4.45 percent to 10.32 yuan after reporting a 26.5 percent rise in net profit for the first half.

Everbright Securities fell 0.60 percent to 11.66 yuan.

-- Dow Jones Newswires contributed to this report --