Spain's improving economic fortunes are drawing investor money into the nation's stock market, which hit a five-year high on Tuesday.

Markit reported earlier this week that its latest purchasing managers index for Spanish manufacturing signaled an improvement in operating conditions in the final month of 2013 as output and new orders rebounded from a fall in November. Operating conditions for the nation's manufacturing sector have improved in four of the past five months.

Further, manufacturing output is surging at the fastest rate since March 2011, Markit said.

The return to growth of the Spanish manufacturing sector at the end of 2013 was a positive sign, largely as it allayed fears that the decline seen in November heralded the start of a new downturn," Markit economist Andrew Harker said. "Rises in output and new orders lay a platform that firms will hope to build on during the new year should tentative improvements in client demand strengthen."

The IBEX share index, which is outperforming other regional stock indexes, surged more than 2 percent Tuesday to 10,099 in heavy trading.

Analysts said investors are moving into Spanish equities because they are seen to be more attractively valued than the shares of companies trading on larger European exchanges.