Asian stock markets remained volatile ahead of the crucial Christmas holiday due to the continuing uncertainty over the situation over budget talks in the US.

The MSCI Asia Pacific excluding Japan Index recorded an increase of 0.1 per cent to 462 in Hong Kong trade this afternoon. Australia's S&P/ASX 200 Index increased 0.3 per cent while Hong Kong's Hang Seng Index gained 0.1% and Singapore's Straits Times Index remained largely flat.

On the mainland China, the Shanghai Composite Index increased 0.53 per cent, South Korea's Kospi Index gained 0.1 per cent while New Zealand's NZX 50 Index also increased 0.1 per cent. Markets in Japan are closed today for the holiday while Australia's markets will close in the afternoon local time.

There is continuing uncertainty over the fiscal cliff situation in the US. President Barack Obama gave a boost to the ongoing talks by expressing that it is possible to salvage the situation in time. However, the developments have slowed because lawmakers and the President himself are away for Christmas holidays.

If the there is not agreement to resolve the situation, a series of spending cuts and tax hikes will automatically take affect from 2, January, 2013. Republicans in the US congress are opposing tax hikes for highest earners and are proposing increasing tax revenue without raising tax rates by limiting tax deductions and closing loopholes.