Asian stocks made a solid start to the second quarter on Thursday inching closer to two-month highs as China's manufacturing sector picked up and foreign buying boosted tech shares in Taiwan and South Korea.
The Nikkei average rose to its highest in a year-and-a-half as the yen's declining trend boosted Japanese exporters and traders forecast more gains in the new quarter in spite of signs of strains on technical charts.
The dollar was down 0.1 percent against the yen after earlier rising to a 3-month high of 93.65 yen.
MSCI's Asia-Pacific ex-Japan index <.MIAPJ0000PUS> rose 0.8 percent, adding to its 1.5 percent gain in the first quarter as technology and industrial stocks boosted the benchmark.
The Thomson Reuters index for regional shares <.TRXFLDAXPU> was up 1.2 percent.
Shares were up as two business surveys showed on Thursday China's vast manufacturing sector moved up a gear in March as orders climbed, pointing to brisk first-quarter GDP growth.
HSBC's China Purchasing Managers' Index (PMI) showed first-quarter manufacturing output expanded at the briskest clip in the survey's six-year history.
The official purchasing managers' index (PMI) rose to 55.1 in March from 52.0 in February, beating the median forecast of 54.5 in a Reuters poll of economists.
The technology-dominated markets of Taiwan and South Korea were among the leading performers in the region with foreign buying boosting the stock markets in Seoul and Taipei because of earnings expectations.
Foreign investors coming in now seem to be long-term funds. Normally they had been more defensive players, but their more active buying is actually lifting the broader market, said Choi Kwang-hyeok, a market analyst at Hanwha Securities.
He added earnings expectations were driving buying from overseas investors.
In Taiwan, foreigners bought T$113 billion in March, the biggest monthly buying since September 2009 and easily reversed February's T$90 billion net selling.
Funds tracker EPFR Global said investor appetite for exposure to emerging markets took global emerging markets equity fund flows to a 10-week high and flows into emerging bond funds to their second best week ever in the period to March 24.
The Shanghai Composite index <.SSEC> was up 0.66 percent while in Hong Kong the China Enterprises Index <.HSCE> of top locally listed mainland Chinese stocks was up 1.5 percent at 12,584.
Goldman Sachs has forecast more gains for the China Enterprise benchmark with a target of 15,000 or 20 percent above the current level.
We sense that Chinese equities have fallen off investors' radars somewhat, positioning is light, and sentiment is, at best, skeptical, making us all the more keen to get involved, a report said while highlighting robust economic growth and undemanding price-earnings multiples.
Materials also received a boost from M&A activity in Australia's sizzling commodities sector.
Australia's Lihir Gold
In Southeast Asia, strong foreign buying lifted stock markets in the region's two biggest economies.
Thailand's benchmark stock market index <.SETI> hit a 21-month high while Indonesia's benchmark index <.JKSE> was up 1.2 percent within sight of the record high hit on January 14, 2008.
The market is now awaiting non-farm payrolls data due in the United States on Good Friday, a holiday for most markets.
Analysts polled by Reuters forecast a 190,000 job gain in March payrolls, which would be the second monthly increase since the recession began in December 2007.
But there is caution in the air after Wednesday's ADP data, used by some analysts to predict the non-farm payrolls report, showed private-sector employers cut jobs this month.
(Additional reporting by Jungyoun Park in SEOUL; Editing by Sugita Katyal)