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Alibaba Group Holding debuts on the Hong Kong Exchanges and Clearing Market on Nov 26, 2019. [Photo/VCG]

Hong Kong stocks advanced 1.22 percent on Tuesday as investors" optimism continued to rise over "phase one" of the US-China trade deal, which will suspend US tariff hikes on Chinese goods.

The benchmark Hang Seng Index surged 335.62 points to 27,843.71, while the Hang Seng China Enterprises Index rose 186.1 points, or 1.73 percent.

The effects from prolonged US-China trade tensions have been gradually mitigated after the phase-one deal was announced and Hong Kong social issues showed signs of abating, which drove market sentiment, said Dickie Wong Tak-kei, executive director of research at Kingston Securities.

However, as the trade deal has not yet been signed, Wong warned the market to stay on guard for possible market volatility.

Foreign Ministry spokesman Geng Shuang said on Tuesday that the United States and China need to complete some necessary procedures before the agreement can be signed. He said more details will be released later.

The US and China announced the deal on the text of a phase-one economic and trade agreement last week, which underpinned market sentiment. US President Donald Trump said on Monday that the deal is nearly complete, with some translations still to be done.

In addition, the Hong Kong dollar is having its longest rally in eight years, Bloomberg News reported. Wong said the recent strengthening of the Hong Kong dollar means that the market has high demand for the Hong Kong dollar while also having a positive effect on the stock market.

Wong highlighted the performance of listed companies with a weighted voting rights structure such as Xiaomi and Meituan-Dianping in recent days, adding that the companies with weighted voting structure are estimated to be included in the Hang Seng Index in the third quarter of next year.

The shares of Xiaomi rose 1.52 percent to HK$10.68 ($1.37) per share, which hit a six-month high. Meituan-Dianping saw its shares go up 2.15 percent to HK$104.5 per share. Besides, Tencent gained the most on the Hang Seng today, rising 3.17 percent to HK$371.2 per share.

Wong expects the HSI to rise at the maximum level of 28,000 to 283,000 points at the end of this year.

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