Hong Kong - Asian stock markets surged upward Monday as investors reacted to optimistic signals of a beginning to economic recovery in the region and gains on Wall Street.

Hong Kong shares climbed 5.54 per cent to a six-month high Monday following gains on Wall Street and hopes that the global economy might be on the road back.

The Hang Seng Index rose 860.06 points to close at 16,381.05, its highest level since October.

China's stocks rose to their highest in nine months after reports showing manufacturing expansion gave investors hope that stimulus measures were working to revive the country's economy.

The Shanghai Composite Index rose by 3.3 per cent, to 2,559.91 at the close, its highest since August 8. The single-day gain was the most since March 4. The CSI 300 Index that tracks the exchanges in Shanghai and Shenzhen, increased 3.5 percent.

Taiwan's stocks rose 5.63 per cent, tracking strong gains late last week as investors bought strongly on bright prospects related to the island's plan to open itself for Chinese investments, dealers said.

All major sectors rose, with financials advancing 6.9 per cent to lead the gains, followed by construction at 6.5 per cent and textiles at 6.2 per cent.

Dealers said the government's permission for qualified Chinese institutional investors to invest in the local stock market from Monday, and its plan to allow Chinese investments in Taiwan possibly by next month, prompted foreign institutional investors to buy strongly.

Shares climbed 2.1 per cent Monday on the Seoul stock exchange led by gains in the banking sector amid signs of better economic data ahead. South Korea's currency surged against the dollar.

The benchmark Kospi index increased 28.56 points to close at 1,397.92.

Thai shares jumped almost 3 per cent on growing confidence in the US economy's recovery.

The Stock Exchange of Thailand index closed up 2.96 per cent at 506.26 points, it the highest in six months.

"Investors were encouraged by the improved economic outlook for the USA," Adkinson Securities analyst Chaiyod Jitwankul said.

Australian stocks rose sharply Monday, taking their benchmark index to its highest level in six months, after Wall Street shares gained and swine-flu infections appeared to be ebbing.

The ASX 200 was up 113 points, or 2.9 per cent, to close at 3,883.

All sectors except gold miners and petroleum companies were higher. The Australian dollar also rose, closing the day worth 73.67 US cents.

Indonesian shares also rose 3.4 per cent, while the Singapore stock exchange surged nearly 5.65 per cent, buoyed by gains on Wall Street and strong performance throughout other Asian markets.

Indian stocks consolidated on previous gains as the bellwether Sensex index rose more than 5 per cent to touch a seven-month high Monday on brisk buying and favourable global cues.

The Bombay Stock Exchange's 30-share sensitive index Sensex hit 12,003.44 points, a gain of 600 points or 5.26 per cent at midday.

All the 13 sectoral indices on the exchange were in the black, with metals, banking and technology stocks performing the best.