Asian stock markets extended gains Thursday as encouraging economic reports from the U.S. and China continued to buoy sentiment.

Hong Kong's Hang Seng gained 0.29 percent or 66.99 points to 23,378.97 and India’s BSE Sensex advanced 0.26 percent or 51.25 points to 19,765.49 while South Korea’s KOSPI Composite declined 0.48 percent or 9.76 points to 2,021.34. Markets in Japan and China remain closed for a public holiday.

The markets opened on a positive note, tracking cues from the rally on Wall Street Wednesday as investor sentiment turned positive after the U.S. House of Representatives passed a deal to avert the fiscal cliff. All the three major stock indices climbed more than 2.35 percent following the fiscal cliff deal and the better-than-expected U.S. manufacturing data.

The Institute for Supply Management (ISM) said Wednesday that the U.S. factory activity recovered from a contraction in December. ISM's manufacturing purchasing managers Index (PMI) rose to 50.7 in December from 49.5 in November and also topped the analysts’ expectation of 50.3 reading.

The data came just one-day after an official report showed that Chinese manufacturing activity expanded for the third straight month in a row in December, indicating some stabilization in the global recovery trend, particularly in the U.S. and China.

Meanwhile, the news that non-manufacturing activity in the world's second largest economy improved in December also added to the sentiment. The data released by the National Bureau of Statistics showed that the non-manufacturing Purchasing Managers' Index (PMI) rose to 56.1 in December from 55.6 in November.

“The global economic outlook is improving. That will underpin further gains in share markets along with very easy monetary conditions. There’s still more upside to go. That probability of the fiscal cliff and a U.S. recession has been taken out,” Shane Oliver, Sydney-based head of strategy at AMP Capital Investors Ltd., told Bloomberg.

In Hong Kong, China Resources Land Ltd. surged 4.24 percent and China Overseas Land & Investment Ltd. gained 1.04 percent while Ping An advanced 2.05 percent.

In Seoul, Hyundai Motor Co. plunged 4.63 percent and Samsung Electronics Co Ltd. declined 2.09 percent while Kia Motors Corp. plunged 3.02 percent.