Nikkei Closes at 4.5-Year High; China Rallies Over 2%

Nyshka Chandran

Rallies in Shanghai and Sydney helped Asian stocks rebound on Tuesday as Japanese shares hit a four-and-a-half year closing high and investors cheered China's pledge to boost spending at its annual parliamentary meeting.

Outgoing Chinese Premier Wen Jiabao set out a reform plan during the gathering of lawmakers in Beijing, known as the National People's Congress in order to achieve a 2013 growth target of 7.5 percent.

Mainland shares recovered 2 percent after hitting a 6-week closing low on Monday, lifting the Hang Seng Index up 0.1 percent to end in positive territory for the first time in three days.

Japan's closed at its highest levels since October 2008 while Australia's index ended 37 points shy of a four-and-a-half-year peak. South Korea's stock market came off earlier highs to close up 0.2 percent.

Shanghai Composite's Rebound

Bull vs Bear: The Road Ahead for China

Banks led the Shanghai Composite higher after the benchmark seven-day repo rate fell on Tuesday, indicating an improvement in money supply conditions with Industrial Bank leading gains by 10 percent.

However, property shares extended losses after experiencing the worst selloff since June 2008 in the previous session. Developers like Poly Real Estate fell between 1 percent.

(Read More: China Property Curbs May Knock 10% Off Prices)

One expert told CNBC's Asia "Squawk Box" that China's growing property speculation could amount to an even larger crisis than the U.S. housing crash. "China has more property than the U.S. has, so it would be the biggest property bubble per say," said John Silvia, chief economist at Wells Fargo.

However, he dismissed the chances of a crash. "China's long run trend is very positive. They will cycle around that trend so I don't see a big bust coming here."

Nikkei Closes at 4.5-Year High

Tokyo equities closed at fresh highs after Tuesday's confirmation hearing of Kikuo Iwata, the nominee for one of the deputy central bank governors, boosted expectations of further monetary easing.

Iwata is widely known to share similar views on aggressive monetary policy as Haruhiko Kuroda, the government's choice for Bank of Japan Governor. Hopes of bold stimulus under the reins of Prime Minister Shinzo Abe's government has spurred a 35 percent rally in the Nikkei since November.

(Read More: Kuroda Will Be the 'Carlos Ghosn' of the BOJ)

Amid big movers, clothing store operator Fast Retailing added 5.5 percent after reporting a 9.6 percent rise in same-store sales at its Uniqlo outlets from a year earlier. Electrical equipment makers were amid the best sector performers with Taiyo Yuden rising over 9 percent.

ASX 200 Rallies

Will the RBA Ease in 2013?

Australia's benchmark index closed up 1.3 percent, within reach of hitting the 5,112-mark, which would mark a fresh four-and-a-half-year high.

Banking stocks underpinned market gains with Westpac leading gains by nearly 3 percent while Commonwealth Bank of Australia rallied over 2 percent.

The index showed little reaction to the Reserve Bank of Australia (RBA)'s decision to keep rates unchanged at a record low of 3 percent, which was largely forecasted by a majority of economists polled by Reuters.

The central bank did state there was scope to ease policy further if needed, but one analyst told CNBC's "Cash Flow" that investors should not be expecting any future stimulus given the RBA's recent 25-basis point cut in December.

"It takes a while for interest rate cuts to flow through to the marketplace. What you're going to see is that if they do cut rates again, they would be on hold for an extended period of time. We're actually calling for no rate cuts for the remainder of 2013," said Nick Maroutsos from Kapstream Capital.