Asian shares were mixed on Friday with a pick-up in China's manufacturing sector lending support but worries over the progress of U.S. budget talks to avert the "fiscal cliff" weighing on investor sentiment.
Growth in China's vast manufacturing sector picked up in December, a preliminary private survey showed, with rises in areas such as new orders and employment underlining a brighter outlook for the economy in coming months.
The FTSE CNBC Asia 100 was steady, inching down 0.03 percent.
Onshore China shares posted their sharpest gains in more than three years on Friday amid speculation of new state-backed buying in mainland markets.
The improved sentiment comes ahead of an annual policy-setting meeting over the weekend that will chart the course for the Chinese economy in 2013.
The CSI300 Index of the top Shanghai and Shenzhen listings closed up 5.1 percent at 2,355.9, while the Shanghai Composite Index soared 4.3 percent. The indices jumped 4.9 and 4.3 percent for the week, respectively, their second-straight weekly gain.
Shanghai volume was the highest since March 14 as the financial sector led gains in mainland markets. Friday's gains were both indices' best daily showing since October 2009.
Financials gained with Industrial and Commercial Bank of China (ICBC) rising 4 percent.
Shares of Ping An Insurance surged 8 percent in Shanghai and 3.6 percent in Hong Kong.
Hong Kong shares closed at their highest in more than 16 months, posting a fourth-straight weekly gain, helped by resurgent mainland Chinese stocks.
The Hang Seng Index closed up 0.7 percent on the day and 1.9 percent on the week at 22,606 points, the highest close since Aug. 1, 2011. The China Enterprises Index of the top Chinese listings in Hong Kong climbed 1.5 percent on the day and 3.6 percent this week.
Offshore Chinese markets in Hong Kong underperformed onshore peers for a second straight week.
China Longyuan Power Group dived 5.4 percent to HK$5.23, above the top end of the HK$5 to 5.20 range at which the wind power generator priced its HK$2.42 billion ($312 million) new share offering.
Japan's Nikkei average inched down on Friday as investors were cautious ahead of this Sunday's election, with strong expectations that the main opposition party, which favors aggressive easing, is set for victory.
The benchmark index closed down 0.05 percent at 9,737.5 after closing at its highest level since April 5 on Thursday. The broader Topix index added 0.2 percent to 801 points.
Some exporters, which were big gainers in the previous day, trimmed early losses as the dollar hit a nine-month high against the yen. Honda Motor added 0.3 percent after falling as much as 1.7 percent in early trade, while Sony gained 1 percent after falling 1.4 percent earlier.
Sharp climbed 4.4 percent, extending recent gains on short-covering after the struggling TV maker said earlier this month that U.S. chipmaker Qualcomm will invest $120 million in the Japanese company.
Hitachi, Japan's largest industrial electronics maker, fell 2 percent after its Chief Executive on Thursday said it is open to collaborative work with Mitsubishi Heavy Industries on nuclear plants.
Japanese business sentiment worsened for a second straight quarter in the three months to December and will barely improve early next year, a central bank survey showed.
South Korean shares edged lower on Friday, with upbeat data from China helping to narrow early losses, but still finished the week higher to notch up a fourth consecutive weekly gain.
The Korea Composite Stock Price Index (KOSPI) lost 0.4 percent to 1,995 points. The index closed at a three-month high on Thursday.
LG Display was a big loser, falling 3.9 percent. Shares in the flat-screen maker rose 32 percent in value between September and December, making it ripe for profit-taking.
SK Holdings slumped down 4.3 percent following news that unlisted affiliate SK Engineering & Construction is being sued by a Mexican oil company.
STX Pan Ocean leapt 9.5 percent after local media reported that its cash-strapped parent company STX Corp was in talks with various companies to sell its controlling stake.
Australian shares ended flat, giving up most of the day's gains despite encouraging manufacturing data from China, as investors remained cautious amid stalled U.S. talks to avert steep tax increases and spending cuts.
The S&P/ASX 200 index was steady at 4,583.1 points.
Improving iron ore prices bolstered Fortescue Metals 1.4 percent, while activity in the bigger miners was more subdued, with BHP Billiton ending up 0.2 percent and Rio Tinto up 0.4 percent.
Shares in insurer IAG fell 2 percent after the group said it will sell its loss-making UK operations, including selling Equity Red Star to buyout firm Aquiline Capital Partners for about A$130 million.
The day's biggest loser was APN News & Media, which plunged 16 percent to A$0.265 after warning that its net profit would drop by about a third this year to between A$51 million and A$54 million as advertising markets in its publishing business were weaker in the second half than the first half of the year.
Shares in Caltex Australia jumped as much as 4.6 percent to a five-year high of A$19.80 after the oil refiner said it expects to return to a full-year profit before one-off items in the range of A$455 million to A$475 million, after posting a loss in 2011.
New Zealand's benchmark NZX 50 index ended up 0.1 percent to 3,979.1 points.
In India, the BSE Index ended the day 0.48 percent higher, while the NSE Index was up 0.55 percent.