Hong Kong stocks rose a quarter of a percent on Tuesday as bellwether stocks such as lender HSBC and mobile phone service provider China Mobile were lifted by higher overseas markets.
But large property stocks such as Sun Hung Kai Properties and retailers continued to sag on signs of a weakening real estate market and worries that higher interest rates were sapping consumer spending.
Global bank HSBC Holdings Plc rose 0.33 percent to HK$122.30, while China Mobile (Hong Kong) Ltd rose 0.58 percent to HK$34.50.
Sun Hung Kai Properties Ltd fell 0.9 percent to HK$72.40. The city's top developer tapped its lowest levels in nearly 7 months on worries that rising interest rates will further dampen new home sales.
"It looks pretty grim. We are not going to see a reversal of flows momentarily. The news is negative, including rising interest rates, rising bird flu outbreaks and fund outflows," said Alex Tang, research director at Core Pacific- Yamaichi International
The blue chip Hang Seng Index ended 0.26 percent, or 37.4 points, higher at 14,403.20. Turnover was below recent averages with HK$15.3 billion (US $1.96 billion) worth of shares exchanged.
Dealers said sentiment for property stocks was further soured by news that the number of households with negative equity rose by 300 cases to about 9,000 in September.
Most dealers expect Hong Kong banks to raise prime rates again before the end of the year, with prime rates seen tapping 9 percent by mid-2006, their highest levels in 5 years.
China's largest oil producer, PetroChina Co Ltd, fell 1.68 percent to HK$5.85 as crude prices fell below $60 a barrel on unseasonably warm US weather.
PetroChina, which accounts for nearly a fifth the weighting of the China enterprise index, dragged China plays lower.
The H-share index fell 0.5 percent to 4,876.87.
Global casual wear retailer Esprit Holdings extended recent losses, falling 2.5 percent to HK$54.50 as the dollar rallied to 2-year highs against the euro currency. The bulk of Esprit's sales are in Europe.
Retailers were among the top losers on worries that rising interest rates would dampen consumer spending and after Hong Kong posts weaker-than- expected retail sales data late on Monday.
Casual wear retailer Giordano International Holdings Ltd extended recent losses, falling 5.95 percent to HK$4.35.
The stock had shed 18.85 percent over the past 3 months through Monday's close as the opening of Hong Kong Disneyland in September failed to spark a sharp rise in sales as many investors had anticipated.
Trendy clothing retailer I.T.fell 11 percent to HK$0.97. The shares are down nearly 58 percent since the company listed in early April.