Hong Kong stocks edged up 0.1 percent on Tuesday after investors bid up China Mobile amid a renewed focus on the prospect of 3G licences to spur a widely expected industry restructuring.

But Hong Kong property developers underperformed after a muted land auction that saw a West Kowloon site fetch HK$5.6 billion, below forecasts for HK$7 billion. The uncertainty over U.S. interest rates also cast a pall over their shares.

Biofuel play China Agri-Industries Holdings Ltd. tumbled in heavy trade amid uncertainty over China's stance over grain-based fuel ethanol plants.

Small caps took commanding positions in the day's trade as benchmark stocks continued to trade sideways. But many brokers were wary of these so-called third- or fourth-liners.

There are a lot of traps out there, said Dale Tsang, managing director at Polaris Capital Management.

Not all of them will turn out to be a golden goose.

The benchmark Hang Seng Index closed up 20.90 points at 20,636.39, earlier veering into negative territory after China's May consumer price index (CPI) registered 3.4 percent, in line with economists' forecast.

The data spooked investors, but by the afternoon, mainland shares had regained poise, restoring confidence in Hong Kong.

The China Enterprises index of mainland H shares also closed nearly flat, rising 13.96 percent to 10,917.95, supported by a further rally in coal stocks.

There's no direction in the market, but sentiment is not too bad, said Patrick Shum, strategist at Karl Thomson Securities.

The market has strong support at the 50-day moving average and the index will go up before it drops to that level.

Mainboard turnover was HK$57.6 billion (US$7.4 billion), up from Monday's HK$55.9 billion.

The Hang Seng property sub-index fell 0.3 percent, paring earlier losses. Henderson Land dropped 1.4 percent to HK$52.35 and Cheung Kong (Holdings) fell 0.8 percent to HK$101.30.

China Mobile , Tuesday's most active stock, jumped 1.7 percent to HK$74.10 as it sought to catch up to the sharp gains posted by other telcos on Monday.

China Agri-Industries tumbled as much as 12 percent before ending at HK$5.79 for a 7.1 percent loss. Investors dumped the stock following media reports that China would not issue licences for new ethanol fuel production projects derived from grain crops or approve production increases in existing grain-based projects. China Agri said it was unaware of such decrees by China.

Coal stocks rallied further a day after several brokers issued positive reports on the sector, with CLSA raising its coal price forecasts by 13 percent for 2008.

Yanzhou Coal jumped 1.7 percent to HK$10.92 and China Coal raced up 1.1 percent to HK$10.78.

Phoenix Satellite Television jumped 7.2 percent to HK$1.93 after its chairman said the 24-hour news and entertainment broadcaster had sealed a long-term deal to sell content to China Mobile and expected overall advertising revenue to leap by a tenth during the 2008 Beijing Olympics.

(US$1=HK$7.8)

China HANG SENG INDEX