SHANGHAI: China stocks rose on Tuesday after the central bank cut the amount of cash banks must hold in reserve, while investors cautiously watched if Evergrande would default as the world's most indebted developer inches closer to a debt restructuring.
In early morning trade, the CSI300 index was up 0.7% at 4,927.23 points, while the Shanghai Composite Index gained 0.4% to 3,603.32 points.
The Hang Seng index added 1.1% to 23,616.30 points. The Hong Kong China Enterprises Index gained 1.4% to 8,387.11.
Risk appetite got a lift after the People's Bank of China said on Monday that it would cut the amount of cash that banks must hold in reserve, its second such move this year, releasing 1.2 trillion yuan ($188 billion) in long-term liquidity to bolster slowing economic growth.
"The RRR cut is likely to boost investment sentiment and support valuation in the stock market," said Chaoping Zhu, Global Market Strategist, J.P. Morgan Asset Management.
"However, investors should also bear in mind that the long-term reform goals, such as common prosperity, deleveraging and decarbonization, remain on the table and may continue to weigh on the investment landscape in China," Zhu said.
On property policies, a Politburo meeting memo on Monday dropped their previous stance of "housing is for living, not for speculation," and said it would support the private housing market to better meet reasonable needs.
Nomura analysts said investors should avoid over-interpreting the memo, but added that it could be a positive piece of news as it might correct many of these market-distorting curbs.
Shares of China Evergrande Group rose more than 7% in early trading on Tuesday as the embattled developer moves closer toward a restructuring that has loomed for months over global markets and the world's second-largest economy.
The market is watching if the real-estate giant, which is grappling with over $300 billion in liabilities and is at risk of becoming China's biggest ever default, has paid $82.5 million coupons with a 30-day grace period coming to an end.
A formal default it would trigger a wave of cross defaults that would ripple through the property sector and beyond.
In mainland markets, the real-estate developers surged 2.6% while tourism stocks added 2.2%.
In Hong Kong, tech giants rebounded 2%, tracking gains in Wall Street, after the sector tumbled on ride-hailing giant Didi's delisting from New York.
E-commerce giant Alibaba Group bounced back from its record low and surged more than 8%, while Tencent Holdings and Meituan added 1.5% and 2.6%, respectively.