Hong Kong stocks closed at a 20-month high on Tuesday, helped by steady and robust demand from investors in mainland China for shares in the Asian financial hub.

** The Hang Seng index rose 2.7%, to 29,642.28, the highest closing level since May 3, 2019, while the China Enterprises Index gained 2.4%, to 11,734.33.

** Leading the gains, the Hang Seng tech index and the Hang Seng financials index both closed 2.8% higher.

** "It's mainly because of the liquidity foam. The outperforming stocks are benefiting from southbound flows," said Steven Leung, a Hong Kong-based executive director at UOB Kay Hian.

** He said the AH premium also makes Hong Kong equities attractive to mainland investors.

** At close, China's A-shares were trading at a premium of 33.86% over Hong Kong-listed H-shares.

** Mainland investors purchased 26.1 billion yuan ($4.02 billion) worth of Hong Kong stocks on Tuesday via the Stock Connect linking mainland and Hong Kong, after spending a record HK$23 billion on Monday, according to HKEX and Refinitiv data.

** For the past two years, the Hong Kong stock market had been far underperforming the A-share market and US stocks, and the southbound inflows now are expected to help a recovery in the valuations of Hong Kong stocks, Essence International noted.

** The brokerage expects easing Sino-US tensions after President-elect Joe Biden takes office, noting he would mainly focus on combating the coronavirus outbreak in the United States and soothing domestic divisions.

** Around the region, MSCI's Asia ex-Japan stock index was weaker by 0.24%, while Japan's Nikkei index closed up 1.39%.

** The yuan was quoted at 6.4879 per US dollar at 08:16 GMT, 0.06% firmer than the previous close of 6.4921.