Asia Markets

Shanghai composite widens gains to 5% in final half-hour


Asian stocks extended their recovery into the final trading day of the week as investors cheered a second day of gains in Chinese and U.S. markets.

China's benchmark Shanghai composite ended 5 percent higher, with gains accelerating in the final half-hour of trade. Friday's rally followed a 5.4 percent gain on Thursday amid reports late in the session that the People's Bank of China purchased blue-chip stocks and requested that state-owned banks buy more yuan on its behalf. Despite the stellar gains, the index still ended the week down 7.8 percent.

David Cui, head of China equity strategy at Bank of America Merrill Lynch, told CNBC that there was likely more intervention on Friday.

"There still aren't enough genuine buyers in the market so the government is really the buyer of last resort. As soon as people sense the government's resolve to hold up the market is weakening, investors will dump stocks."

Shanghai's gains were also underpinned by news that pension funds will invest $313 billion in stocks and other assets as soon as possible, according to remarks by China's Vice Minister of Human Resources and Social Security on Friday.

Meanwhile, Wall Street's more than 2 percent gains on Thursday brought indices out of correction territory thanks to a strong revised estimate of second-quarter gross domestic product.

Higher oil prices also contributed to the positive mood in Asia. Brent and Nymex extended gains on Friday after posting their biggest daily rally in six years overnight, helped by the prospect of lower Nigerian crude exports.

To be sure, overall sentiment still remains fragile amid conflicting comments from Federal Reserve officials at a key meeting of central bankers at Jackson Hole. Kansas Fed President Esther George told CNBC on Thursday that interest rates should be normalized in September, one day after New York Fed chief William Dudley said a interest rake hike next month seemed less compelling.

China markets rally

In Shanghai, energy stocks led the broader market higher on the back of rising oil prices; Sinopec climbed 5.9 percent while PetroChina added more than 4 percent.

Investors brushed off official data showing a 2.9 percent annual decline in China's July industrial profits. The report was "less awful than expected," explained Bill Adams, senior international economist at PNC Financial Services, in a note.

"China's mining and steel industries are undergoing a deep correction; the rest of the industrial sector looks weak but not terrible. While risks are to the downside for growth, these data could be consistent with headline real GDP growth of 6.5 percent in the second half of 2015."

Meanwhile, Hong Kong shares fell 1 percent after hitting a one-week high earlier in the session, with BAIC Motor notching modest gains after Reuters reported it may be taking a stake in German carmaker Daimler.

Read MoreA cheaper yuan actually boosts these HK stocks

Asia is still attractive: HSBC

Nikkei 3% higher

Japanese stocks closed above the 19,000 mark for the first time in a week, bolstered by a spate of deal-making.

Japan Display jumped 7 percent on reports it is buying Sharp's distressed liquid crystal display (LCD) business; the latter's share price shot up 9 percent. Meanwhile, engineering firm Chiyoda surged 6 percent after agreeing to buy a 50 percent stake in the subsea services business of oilfield services firm Ezra Holdings.

Investors also digested mixed July data released before the market open. Household spending fell 0.2 percent on year, missing expectations for a 1.3 percent climb. But on the bright side, consumer prices were unchanged from a year earlier, defying expectations for a fall, and retail sales also came in stronger than expected.

ASX up 0.4%

Australia's benchmark index closed at an eight-day high, extending gains into a fourth straight session.

But banks capped larger gains on the index, with near 1 percent losses for Australia New Zealand Banking and Westpac.

Atlas Iron added 19 percent after announcing progress in its plans to cut costs and increase production.

Supermarket chain Woolworths rose 1.5 percent despite reporting its first drop in full-year profit in nearly two decades.

Kospi up 1.5%

South Korean stocks also gained for a fourth consecutive session, hitting a nine-day high and ending the week 3.3 percent higher.

Read MoreCan Korean stocks sustain their gains?

Among large-cap stocks, steelmaker Posco increased 3.6 percent while heavyweight Samsung Electronics rose 1.3 percent.

Emerging markets higher

Indonesia's Jakarta composite rose as much as 2 percent, its biggest daily jump in two years, on news of a policy package aimed at shoring up the battered rupiah.

Elsewhere, Philippine stocks jumped 1 percent, tracking the Asia-wide rally.