Asian stock markets mostly advanced Wednesday but gains were capped as investors are being cautious ahead of the EU summit that begins Thursday.

Japanese benchmark Nikkei gained 0.77 percent or 66.50 points to 8,730.49, Hong Kong's Hang Seng surged 1.03 percent or 195.11 points to 19,176.95 and Indian benchmark BSE Sensex gained 0.23 percent while South Korean shares ended flat and Chinese Shanghai Composite declined 0.23 percent.

Investors remained watchful before the European Union (EU) leaders' two-day meeting in Brussels as hopes faded that the leaders of all 27 member states will find any substantial measures to solve the sovereign debt crisis.

“The European debt crisis will take time to resolve and we believe investors expecting bold moves on Eurobonds or a euro wide bank deposit scheme at this week's EU Summit will be disappointed. We believe the outcome of the summit is most likely to be more strong rhetoric supporting the roadmap towards tighter fiscal integration, rather than the end point itself,” said a note from Barclays Capital.

Meanwhile, concerns over the strength of the economic recovery in the world’s largest economy eased slightly, reports showed that U.S. home prices inched up in April and new home sales rose to a two-year high in May, suggesting that housing sector recovery which is linked to the health of the overall economy is gaining traction.

In Japan, retail companies shares were among the top gainers while exporter companies fell on stronger yen. Fast Retailing Co gained 1.81 percent and J Front Retailing Co surged 3.47 percent while Canon Inc declined 1.6 percent and Toyota Motor fell 0.49 percent.

Chow Tai Fook Jewellery shares rallied 5.2 percent in Hong Kong after announcing that its net profit jumped 79 percent to HK$6.34 billion. The company stock was also initiated with an “overweight” rating at Barclays Capital with a price target of HK$12.

Seoul shares ended flat as heavyweight Samsung's rally was offset by sharp declines in blue-chip auto companies’ shares. Hyundai Motor plunged 3.14 percent and KIA Motors plunged 3.29 percent while Samsung Electronics gained 2.46 percent.