China Stocks Hit 7-Week High; Asia Pares Losses

China's benchmark index out-performed the broader Asian market for a second straight session on Friday as investors cheered moves by the government to ease strict regulation while the rest of Asia's equity markets traded cautiously as concerns grew over a U.S. Federal Reserve exit from quantitative easing.

The Shanghai Composite hit a seven-week high at 2,288 points while the Nikkei pared losses to close above 15,000 and Sydney's S&P ASX 200 added 0.4 percent.

Liquidity and volume were light in Asia with financial markets in South Korea and Hong Kong shut for public holidays.

For the week, the Nikkei out-performed global peers with gains of over 3 percent compared to a 1 percent increase in the FTSE 100 and the S&P 500.

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End of Stimulus?

Comments by San Francisco Fed President John Williams and Philadelphia Fed President Charles Plosser stating their openness to tapering the central bank's bond-buying program weighed on sentiment in Asia.

(Watch Now: Fed's Stimulus: More Harmful Than Helpful?)

"As they [Fed] taper, they are still easing but just not as aggressively. It's going from what used to be a 1 percent drop in the Fed funds rate to a quarter-percent drop so I think that's important in the context that many people lose, they think of tapering as tightening, which it's not," said Diane Swonk, chief economist at Mesirow Financial.

Shanghai Gains

A rally in real estate stocks lifted the benchmark index to its highest levels since March 28. Vanke soared 4 percent while China Merchants Property and Poly Real Estate added 2.5 percent each.

(Read More: Will China Buy Up Greece's Best Assets?)

News that regulators eased restrictions on the refinancing process for firms with real estate investments spurred a 5 percent rally in property stocks on Thursday.

Fears of overcapacity hit metal-related stocks after China's vice premier said that national demand for commodities had weakened and urged industrial sectors to limit expansion. Dongxi fell 2.5 percent and Shanghai Tech lost 2 percent.

Nikkei Cools

Amid a lack of fresh catalysts such as earnings, the Nikkei moved off its five-and-a-half year high, but experts are calling the current pull-back just a healthy correction after gains of 43 percent since the start of 2013.

"We have an index target of 15,100 for next three months. Six months, we're looking at 16,100 and then in the one-year time horizon, we're looking at 18,500," said Sailesh Jha, chief strategist at Arcus Capital Singapore.

Continued hopes of "Abenomics" underpinned a rally in real estate stocks. Heiwa Real Estate surged 9 percent while the Japan Retail Fund rose 8 percent as investors cheer the Bank of Japan's pledge to purchase financial assets, including real estate investment trusts, to create inflation and growth.

Nippon Sheet Glass tanked 5 percent after posting weak earnings guidance for the current business year.

Australia Edges Up

Shares of engineering giant WorleyParsons, tumbled 12.5 percent after cutting its profit guidance, citing softening demand for resource infrastructure. This led to declines across construction stocks with Macmahon Holdings slipping 9 percent.

Resource stocks reversed previous losses after the Australian dollar hit a fresh 11-month low of 0.9733 against the greenback. A weaker Aussie lowers costs for miners and boosts their U.S dollar earnings. BHP Billiton and Fortescue Metals jumped 2 percent each.

By's Nyshka Chandran . Follow her on Twitter @NyshkaCNBC