Asian stock markets advanced Tuesday on renewed hopes that the European Central Bank (ECB) would shortly take policy action to lower the peripheral bond yields of struggling nations such as Italy and Spain.

Japan's benchmark Nikkei gained 0.88 percent or 77.02 points to 8803.31, Hong Kong's Hang Seng advanced 0.39 percent or 77.59 points to 20,076.31 and India's benchmark BSE Sensex rose 1 percent or 174.16 points to 17,587.12 while Chinese Shanghai Composite advanced 0.13 percent and South Korea's KOSPI Composite ended flat.

Market sentiment improved as borrowing costs in Spain and Italy slightly lowered Monday after German Chancellor Angela Merkel's government lent its support to the ECB's bond buying plan. Spanish 10-year bond yields declined 14 bps to 6.8 percent and Italian 10-yields fell 6 bps to 6.0 percent on speculation that the ECB would buy sovereign bonds to help bring borrowing costs down.

The investor sentiment remained optimistic as the ECB's strong tone in recent days suggested that the central bank would prepare something in coordination with the governments in the coming weeks to boost the weakening euro zone economy. The ECB announced last week that it might buy Spanish bonds if the government first applied for the European Financial Stability Facility (EFSF) support.

"Investors are less pessimistic about the euro zone situation. There is the expectation that something positive will come out of the ECB plan and so investors are more willing to search for risky assets that look attractive," Aroop Chatterjee, senior currency strategist at Barclays Capital in New York, told Reuters.

Meanwhile, investors also turned their attention to China as the world's second largest economy will release its monthly data pack later this week and investors are looking for signs of improvement after China's recent pro-growth measures.

However, analysts at Credit Agricole have said the sequential rebound is unlikely, and the headline data should continue to soften. Reports on monthly retail sales, fixed asset investment, exports and imports are expected to show a slowdown on an annual basis and to come in below previous consensus expectations.

In Japan, Asics Corp. surged 4.67 percent and Sharp Corp gained 1.10 percent while Honda Motor Co, Ltd advanced 1.17 percent.

Oil-related shares went up across the region on higher crude prices. CNOOC Ltd. gained 1.15 percent in Hong Kong while Inpex Corp surged 2.24 percent and JX Holdings Inc advanced 1.83 percent.

Weakness in Chinese insurers and Standard Chartered shares limited the upward move in Hong Kong. Sands China Ltd. surged 4.24 percent and MGM China Holdings gained 4.55 percent while Esprit Holdings Ltd. rallied 24.77 percent.

China Life Insurance Co Ltd. declined 1.39 percent after it warned of a significant fall in its first half profit. Standard Chartered Plc slumped 16.37 percent on news that the bank might be suspended from doing business in New York after the firm was accused by the state authorities of handling more than £250bn in transactions with Iranian banks that violated U.S. money laundering laws.