Hong Kong stocks swung to a 0.5 percent gain on Tuesday after mainland equities reversed sharp losses and oil shares climbed on rising crude prices, with CNOOC Ltd hitting a fresh record.
Hong Kong slipped into negative territory after the CSI 300, which tracks yuan-denominated A shares listed in Shanghai and Shenzhen, tumbled as much as 7.5 percent.
But the index finished sharply higher amid talk that the Chinese government was planning a meeting to discuss how to stabilise its stock market. The benchmark Hang Seng Index closed up 112.56 points at 20,842.15. The China Enterprises index of Hong Kong-listed shares in mainland companies, or H shares, gained 0.9 percent to 11,022.09, having fallen more than 1 percent in the morning session.
"China is still a major influence, and until China settles down, we'll be in consolidation," said Marco Mak, research director at Tai Fook Securities, adding that in the near-term, the market should trade between 20,500 and 21,000 points.
But one widely held view was that China's decline could steer more mainland funds to Hong Kong.
"The correction will spur more mainland investors to look at Hong Kong as a cheaper entry to some of the dual-listed stocks," said Nicholas Yeo, fund manager at Aberdeen Asset Management. Tuesday's total turnover ranked as the fourth-highest ever at HK$78.2 billion (US $10 billion), up from Monday's HK$67.1 billion.
Oil plays topped the day's trades amid high crude prices and broker upgrades. PetroChina Co Ltd, the day's most active stock, jumped 4.5 percent to HK$10.72. Offshore oil specialist CNOOC Ltd rose for a fourth-straight session, settling up 4.4 percent at HK$8.05.
Asia's top oil refiner Sinopec Corp raced up 2.3 percent to HK$8.78. Cheung Kong (Holdings) Ltd gained nearly 1 percent to HK$103.50 after its chairman, Li Ka-shing, raised his stake in the Hong Kong conglomerate, Hong Kong Exchange's filings show. Hutchison Whampoa Ltd, which is majority-owned by Cheung Kong, jumped 2.3 percent to HK$77.60.
Mobile handset maker Foxconn International Holdings slid 1.7 percent to HK$23 in its second straight day of sharp drop. On Monday, Goldman cut Foxconn's earnings estimates and removed the stock from its Asia Pacific conviction buy list. The city's bourse operator Hong Kong Exchanges and Clearing notched up 1 percent to HK$89.25 amid near-record turnover in recent days.