HONG KONG (Nikkei Markets) -- Hong Kong shares headed higher after a choppy morning session on Tuesday, helped by a record finish for equity indexes on Wall Street and lingering hopes for a Sino-American trade deal.
The Hang Seng Index rose 0.5% to 27,694.49 by noon after falling as low as 27,463.33 earlier in the day. Social media and gaming major Tencent Holdings climbed 1.8%, while offshore oil producer CNOOC added 2.1% after global oil prices extended recent gains.
All three major U.S. equity indexes closed at all-time highs on Monday amid optimism over a trade deal. Washington is debating whether to drop some existing tariffs on Chinese goods as a concession to seal a preliminary trade agreement with Beijing, the Financial Times reported, citing five people briefed on the discussions. The U.S. is considering rolling back levies on $112 billion of Chinese imports that were introduced at a 15% rate on Sept. 1, the report said. The Wall Street Journal, citing people familiar with the talks, reported that officials from both countries were "actively" considering rolling back some tariffs.
Both American and Chinese officials have both signaled that trade talks were going well, indicating that phase one of an agreement could be signed as early as this month. Still, equity gains in Hong Kong appeared to be capped as the Hang Seng Index traded near three-month highs.
"It will need new news to support further gains," said Castor Pang, head of research at Core Pacific Yamaichi International (H.K.). The gauge is likely to "consolidate at current levels" without further good news, he added.
In the mainland, the Shanghai Composite Index rose 0.7%, while the yuan traded onshore added 0.1% against the dollar to 7.0225. The People's Bank of China on Tuesday cut interest rates on its medium-term lending facility, trimming the rate on one-year MLF loans to 3.25% from 3.30%.
A private survey released on Tuesday showed services sector activity grew at a slower pace in October, with the Caixin/Markit services Purchasing Managers' Index coming in at 51.1 last month, down from September's 51.3 reading.
Meanwhile, a survey showed business activity in Hong Kong contracted further last month as the city reels from monthslong anti-government protests that have battered the retail and tourism sectors in the Asian financial hub. IHS Markit's seasonally adjusted headline Hong Kong PMI fell to 39.3 in October, down from September's 41.5 reading.
China Evergrande Group climbed 1.2% in Hong Kong after the mainland property developer reported a 70.2% year-over-year jump in October contracted sales.
Shimao Property Holdings rose 4.6% following a 53% jump in October sales from a year ago.
Ronshine China Holdings, which reported a 20.8% increase in last month's contracted sales, climbed 0.8%.
Agile Group Holdings added 1.8% after reporting a 56.3% surge in October's aggregated presales value.
Tibet Water jumped 47.6% after the company said it was not aware of any reason for a share price drop the previous day. The bottled water and beer producer had slumped 67% on Monday.
CMGE Technology Group slid 5.4% to HK$4.03. The mobile games developer said its joint global coordinators for its initial public offering fully exercised an overallotment option for 69.2 million shares at HK$2.83 apiece.
-- Benny Kung