Asian equity markets joined Wall Street's slump on Tuesday after oil markets resumed their downward spiral.
China's benchmark index tumbled as much as 6 percent in the last hour of trade after rallying to a three-and-half-year high of 3,091 points earlier in the session. Analysts attributed the selloff to profit-taking, expectations for 2015 gross domestic product to be lowered to 7 percent and liquidity fears regarding new corporate bond market restrictions, announced on Monday.
Read More: China's 2015 outlook in three words
"An interesting development for risk in the near term will be what happens with China after Monday's alarming trade balance numbers. With both exports and imports declining, there are reports suggesting pressure is ramping up on the People's Bank of China to cut the reserve required ratio," said Stan Shamu, market strategist at IG.
Meanwhile, oil prices fell to new five-year lows in the Asian trading session with Brent crude below $66 a barrel. Overnight, prices tumbled 4 percent on the back of bearish forecasts, which saw the the Dow post its biggest decline since October.
Shanghai 5.3% lower
Mainland shares snapped their five-day winning streak, and the CSI300 bank share index closed down 4.5 percent after slumping as much as 9 percent. Meanwhile, the yuan fell to a five-month low against the greenback. In the past 30 days, the Shanghai Composite has rallied nearly 20 percent on hopes for more stimulus.
Banks were the biggest losers on the benchmark Shanghai Composite; ICBC, Bank of China, Bank of Communications and Agricultural Bank of China lost more than 9 percent each.
Hong Kong stocks lost over 2 percent after rising to a one-and-a-half-week high on Monday, falling for the first time in three sessions.
ASX down 1.7%
Australia's benchmark S&P ASX 200 retreated from one-and-a-half-week highs hit in the previous session, while the Australian dollar sank to a new four-year low against the greenback.
Read More: Charts: Short the Aussie dollar collapse
Energy producers were hit hard; Santos and Oil Search tanked 7 percent each while Origin Energy dropped nearly 5 percent.
Iron ore miners also suffered; BHP Billiton and Fortescue Metals declined 4 percent each.
Nikkei 0.7% lower
Japanese shares snapped their seven-day winning streak, moving off a seven-and-a-half-year high, weighed down by a stronger currency. The yen last traded at 120.7 per dollar, off Monday's seven-year low.
Sentiment was also hurt by a Reuters poll showing that a majority of firms see the economy in a standstill or in recession.
Read More: BOJ increasingly likely to cut price forecast
Sony was one of the biggest losers on the benchmark Nikkei, down 4 percent, following Monday's cyber attack on the company's PlayStation store.
Kospi down 0.4%
South Korean stocks fell for a second day, hitting a one-week low and retreating further from a two-month high hit on Friday.
Read More: Asia's slow financial reforms put taxpayers at risk
Shipbuilders posted steep declines; Hyundai Mipo Dockyard lost 5 percent and Daewoo Shipbuilding declined over 4 percent.
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