By Laura He, MarketWatch

HONG KONG (MarketWatch) -- Hong Kong stocks continued their recovery on Tuesday, rising for a third straight session, as sentiment improved since pro-democracy protesters in the territory continued to shrink in number.

Several primary schools on Hong Kong Island resumed classes on Tuesday, while only six branches of six banks in the affected areas remained temporarily closed, according to separate statements by the Hong Kong government and the region's monetary authority.

The benchmark Hang Seng Index closed up 0.5%, as banks and property developers with strong exposure to the territory were mixed.

Chong Hing Bank Ltd. jumped 4.5%, Standard Chartered PLC climbed 2.4%, both Hang Seng Bank Ltd. and Dah Sing Banking Group Ltd. rose 1.4%, developer New World Development Co. Ltd. improved by 1.3%, Cheung Kong Holdings Ltd. moved up 1.1%, and Sun Hung Kai Properties Ltd. traded 0.9% higher.

However, Sino-British banking giant HSBC Holdings PLC dipped 0.1%, and Henderson Land Development Co. edged down 0.2%.

Most Hong Kong retailers rebounded further, with jeweler Luk Fook Holdings International Ltd. advancing 2.5%, rival Chow Sang Sang Holdings International Ltd. rising 0.5%, and clothing retailer IT Ltd. adding 0.8%.

Casino stocks were mixed after solid gains in the previous day. Both MGM China Holdings Ltd. and SJM Holdings Ltd. dropped 0.9%, while Sands China Ltd. rose 0.7%.

Stock in Fosun International Ltd. headed up 1.2%, after French travel company Club Méditerrané said its board supported an improved takeover bid by a group of investors led by Fosun.

In Japan, the Nikkei Average finished down 0.7%, with the dollar (USDJPY) falling to Yen108.54 from Yen108.83 a day ago. The broader Topix index dropped 0.4%.

On Tuesday, the Bank of Japan left its policy unchanged as widely expected, with the central bank's governor Haruhiko Kuroda saying Japan remained on track to reach its goal of sustained 2% consumer inflation.

Elsewhere, Sydney's S&P/ASX 200 slipped 0.2%, while Seoul's Kospi Composite Index edged 0.2% higher.

On the Chinese mainland, markets were still closed for the National Day holidays but were due to reopen Wednesday.

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