Asian stock markets mostly advanced Friday as investors welcomed Spain's new budget plan, which includes more spending cuts and tax increases.

Hong Kong's Hang Seng gained 0.42 percent or 86.91 points to 20,849.20, Chinese Shanghai Composite surged 0.96 percent or 19.53 points to 2075.85 and Indian benchmark BSE Sensex climbed 1.33 percent while Japanese benchmark Nikkei fell 0.96 percent or 85.61 points to 8864.26 and South Korea’s KOSPI Composite gained 0.18 percent.

Market sentiment turned positive Thursday as renewed concern over the euro zone crisis had eased following Spain’s new budget which aimed at reducing the country's deficit from 6.3 percent in 2012 to 4.5 percent of GDP next year. The Spanish government unveiled an ambitious budget for 2013 that was heavy on new cuts and is expected to pave the way for an official bailout request.

According to the government, the 7.3 percent cut on spending is expected to result in budget savings of 13 billion euros ($16.25 billion) in 2013.  The government announced an 8.9 percent cut in the budgets for the government ministries and froze public sector wages for the third consecutive year.

“The detailed timetable for economic reforms goes beyond what the European Commission has required and is an ambitious step forward. The reforms are clearly targeted at some of the most pressing policy challenges," EU Economic and Monetary Affairs Commissioner Olli Rehn said in a statement, Reuters reported.

Meanwhile, the independent stress tests of Spain's banking sector will be published later Friday and is likely to show that the actual capital needs by the banks could be 50 to 60 billion euros, well below the total 100 billion euros official credit line available.

Sentiment was also supported by the speculation that the Chinese government could launch fresh measures to support growth in the world’s second largest economy. Chinese central bank conducted the largest weekly injection in history this week to prevent the potential short-term liquidity crunch at commercial banks.

Financials went up in China and Hong Kong. China Citic Bank Corp Ltd. gained 1.39 percent and China Construction Bank Corp. advanced 1.53 percent in Shanghai while Bank of China Ltd gained 1.02 percent in Hong Kong.

However, Japanese shares ended lower as industrial production declined for the second straight month in August while fears about falling revenues for the Japanese companies in China also weighed. Industrial production declined 1.3 percent on a monthly basis, weaker than analysts’ estimate of a 0.5 percent fall.

Among the stocks, Sony Corp. declined 1.08 percent and Toyota Motor Corp. plunged 2.41 percent while Honda Motor Co Ltd. plunged 2.68 percent.