Hong Kong shares had their first gain in a week on Tuesday, led by growth-sensitive sectors as slower-than-expected inflation in China eased concerns about potential tightening moves in the world's second-largest economy.
But the rise came in weak turnover with gains in the Chinese banking sector coming on the back of short covering. Global macro funds were seen buying into Chinese airline and cement stocks, traders said.
The CSI300 of the leading Shanghai and Shenzhen A-share listings climbed 0.7 percent, its first rise in seven sessions. The Shanghai Composite Index rose 0.6 percent. Both indexes rebounded from their lowest since December.
The Hang Seng Index rose 0.7 percent in its first gain since April 2. The China Enterprises Index of the top Chinese listings in Hong Kong spiked 1.7 percent to return above its 200-day moving average.
Gains came in Hong Kong turnover 17 percent below average, while Shanghai volume was 14 percent below average. Both markets traded for only three days last week due to various public holidays, but bird flu jitters in the last few days had worsened a selloff from an early February peak for both.
"This lower inflation figure is giving the cyclical sectors a small lift, but gains in Hong Kong look largely on short covering. There's nothing to get too excited about," said Wang Aochao, UOB-Kay Hian's Shanghai-based head of research.
Annual consumer inflation eased to 2.1 percent in March, against a 2.4 percent Reuters consensus and February's 3.2 percent reading. Producer price deflation deepened, dropping 1.9 percent in March, versus a 1.8 percent consensus and February's 1.6 percent annual drop.
More economic data is expected later this week, with trade on Wednesday and money supply due by April 15. First quarter GDP growth data is due on that same day along with industrial output, retail sales and urban investment data for March. On Tuesday, mid-sized Chinese lenders saw the bigger percentage gains in the banking sector. China Minsheng Bank rose 3.4 percent in Hong Kong and 1.2 percent in Shanghai.
Better China macro numbers, along with signs of improving cement prices in eastern China, helped lift cement producers Anhui Conch Cement by 5.4 percent in Hong Kong and 1.8 percent in Shanghai. China National Building Material Co Ltd spiked 5.8 percent.
China Southern Airlines jumped 3.5 percent in heavy volume and has almost fully retraced an 8.5 percent tumble last Friday on bird flu jitters. Its Shanghai listing inched up 0.3 percent. China automaker SAIC Motor jumped 4.1 percent after posting a 17.4 percent rise in March auto sales from a year earlier, alleviating fears of a bigger slowdown. Great Wall Motor surged 6.8 percent in Hong Kong, while rising 1.7 percent in Shanghai.
China-focused food producer Want Want China jumped 3 percent from Monday's one-month closing low on hopes that benign inflation will ease margin pressures. Shoe retailer Belle International spiked 4.4 percent as investors cheered its positive first quarter same store sales growth (SSSG). The 11 percent SSSG growth for its sportswear business in the first quarter was its fastest in more than four years, Bank of America-Merrill Lynch analysts said.
Tuesday's gains lifted Belle further from its lowest since end-June, which was posted last Friday. Still down 21.6 percent on the year, Belle is now trading at a 23 percent discount to its historic median 12-month forward earnings multiple, according to Thomson Reuters StarMine. By comparison, Want Want China is up 8.4 percent and trading at a 15 percent premium. Both stocks are constituents on the Hang Seng Index, which is now down 3.5 percent in 2013.