Mainland China stocks closed at an eight-month high on Tuesday, while Hong Kong shares extended gains to a multi-year peak, driven by construction and power firms after work began on a major dam project in Tibet, billed as the world's largest.

The Hang Seng Index rose to 25,130, the highest since November 2021, on gains of 135.89 points or 0.54 percent.

The Hang Seng China Enterprises Index rose 0.39 percent to end at 9,075.60 while the Hang Seng Tech Index climbed 0.38 percent to 5,606.83.

On the mainland, the benchmark Shanghai Composite Index ended up 0.62 percent at 3,581.86 while the Shenzhen Component Index closed 0.84 percent higher at 11,099.83.

The ChiNext Index, tracking China's Nasdaq-style board of growth enterprises, gained 0.61 percent to close at 2,310.86.

China's blue-chip CSI300 Index ended 0.8 percent higher, touching its strongest point since November.

Some construction and power stocks extended rallies after China announced over the weekend the start of construction on a US$170 billion hydropower dam in Tibet.

Shanghai-listed Anhui Conch Cement and Power Construction of China both hit the daily maximum of 10 percent.

"Investors usually don't care much about the real economy in such a bull market, especially with the rise of their confidence in Beijing's capability in handling any economic cracks," said Ting Lu, chief China economist at Nomura.

Easing Sino-US tensions, Beijing's push for long-term funds to invest in stocks and renewed confidence in the country's manufacturing sector lifted sentiment, Lu noted.

"However, if stock markets lose steam, investors might shift more attention to the real economy, which will likely face some challenges in the second half of this year," Lu said.

US Treasury Secretary Scott Bessent said on Monday that Washington and Beijing would hold talks "in the very near future," with discussions potentially covering China's purchases of Iranian and Russian oil. (Reuters/Xinhua)