Asian stocks pushed higher on Friday and were poised to score double-digit gains in July as investors keep pouring funds on bets the region's growth engine will lead the global economy out of recession.

South Korea's benchmark KOSPI index hit a one-year high and Japan's Nikkei average rose to a 10-month peak as upbeat corporate earnings reports around the world have been viewed as more evidence that companies are coping well and poised to benefit from any recovery.

Shares of Sony Corp <6758.T> jumped 6.4 percent after it posted a smaller-than-expected loss the previous day, even as shares of Nintendo Co <7974.OS> slid after saying quarterly profits fell due to slowing demand for its popular Wii game console.

South Korea offered more evidence of the Asia's strengthening recovery, lifting the won to a 9-1/2-month high. Industrial production jumped 5.7 percent in June, more than twice as fast as expected and a sixth straight monthly increase.

Earnings for the April-June quarter have been stronger than expected and there has been a fair number of upward forecast revisions, all of which is improving sentiment and keeping the market supported, said Yumi Nishimura, deputy general manager in the investment advisory section at Daiwa Securities SMBC in Tokyo.

Market players are looking ahead to U.S. data on the economy's performance in the second quarter, due later in the day. Some economists believe it could mark the end of the sharp contraction as signs point to growth resuming in the second half of the year.

Oil prices extended gains along with other commodities, giving a boost to energy shares such as Sinopec Corp <0386.HK>. The dollar and government bonds lost ground as investors turned to risky assets, such as higher-yielding currencies and equities.

Foreign investors are favoring emerging markets and Asia in a big way, with inflows into Asian equity funds excluding Japan totaling $1.6 billion in the week ending on Wednesday -- the biggest inflow among emerging market groups. Much of that money is being pulled out of money market funds.

Japan has also seen revived foreign buying of stocks. Data from the Ministry of Finance showed that foreign equity purchases last week were the biggest in three months.

A monthly Reuters asset allocation poll found that leading global funds have boosted their holdings of stocks back to the highest levels since the collapse of Lehman Brothers while cutting cash holdings to the lowest until May 2007.

The MSCI index of Asia-Pacific stocks outside Japan <.MIAPJ0000PUS> rose 1.7 percent to reach an 11-month high and the highest level since just before the collapse of U.S. investment bank Lehman Brothers.

For July, the MSCI benchmark for Asia was up 12 percent, scoring its fourth double-digit gain in the past five months on China's economic rebound. This year's elections in Indonesia and India have also been seen as spurring investor-friendly reforms and haves parked big gains in those markets.

The Shanghai Composite Index <.SSEC> climbed 2 percent and was up slightly on the week, erasing Wednesday's 5 percent sell-off, a slide that raised worries that the nearly 90 percent bull run in Chinese shares could start to reverse.

Even the worries that China and some parts of Asia were in the early stages of stock and property bubbles has done little to stem the move higher.

Credit markets have also been on a tear higher.

The iTraxx index of spreads on high-grade companies in Asia ex-Japan has shrunk 54 basis points this month to 132.5 basis points, the lowest since mid-2008 as investors have favored corporate debt.

The dollar slipped as funds moved out of the safe-haven U.S. currency. The dollar index dropped 0.5 percent to 78.932 <.DXY> and retreated back near a seven-month low hit earlier in the week. The euro climbed 0.5 percent to $1.4138, and the dollar dipped 0.4 percent to 95.21 yen.

Japanese government bonds fell further as stocks continued their run higher. The benchmark 10-year yield rose 3 basis points to 1.415 percent to a one-month high, with yields up 6.5 basis points on the month.

U.S. crude oil prices were up 82 cents to $67.76 a barrel, while gold gained $6 an ounce to $939.10.

(Additional reporting by Elaine Lies and Rika Otsuka in Tokyo; Editing by Kazunori Takada)

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