Tokyo's Nikkei rose 0.5 per cent, but the modest gain was enough to push the benchmark above the 16,500-point level for the first time since July 21.

Sentiment in regional markets has been on the upturn due to signs that a recovery is underway in battered Asian economies, and Wall Street's rise to a record high Monday ignited a bull charge.

``Overall market sentiment has improved from before the holidays as people are buying the recovery story of the region,'' Herman Chu, senior dealing manager at Anglo-Chinese Securities in Hong Kong, said.

Even an overnight fall on Wall Street failed to dampen the bullish mood. Singapore and Seouleach gained 1 per cent, Bangkok rose 2.5 per cent, Manila advanced 1.3 per cent and Jakarta edged up slightly. Taipei, Shanghai and Auckland ended in negative territory while Sydney and Kuala Lumpur fell back slightly after strong gains the previous day.

Hong Kong share prices were propelled higher by strong foreign buying, dealers said.

``The market is coming to life, after good performances in Wall Street, London and Tokyo, during the holiday break here,'' said Howard Gorges, vice President at Sout H China Brokerage. ``The market is pretty strong, with gains across-the-board for blue-chip stocks as well as China-related shares,'' he said, adding that foreign funds were returning to the market.

The key Hang Seng index gained 541.89 points to close at 11,614.87 -- its highest since March 24 last year, when the index stood at 11,594.33.

Tokyo's key stock index rose 0.5 per cent to close at its highest level in nearly nine months as foreign investors propped up the market after returning from Easterholidays, brokers said.

``Buying by foreign investors was further boosted by the yen's downturn against the dollar. They focused on leading issues like Sony as some of them pumped in fresh funds,'' said Kokusai Securities Co. strategist Shoji Hirakawa.

Singapore's blue-chip share index closed one per cent higher as a bullish mood reinforced by good sentiment in Japan continued in the market, dealers said. ``The mood continues to be bullish, some people argue we are seeing some spillover from Japan on the view that the US is likely to underperform markets in this region this year,'' a dealer with a Japanese-based brokerage said.

Thai shares closed up 2.5 per cent on a technical rebound with investors taking their lead from firmer regional markets, dealers said. The Stock Exchange of Thailand (SET) composite index rose 8.79 points to 359.52,while the select SET 50 gained 0.80 points to close the day at 26.63 points.