Earlier in the session, the Tokyo bourse had staged a comeback, alongside most of the other regional stock indices, on the back of bargain hunting in beaten-down stocks and as the Dow Jones Industrial Average futures opened up more than 100 points Monday evening in the US.
Stocks have plunged more than 30 percent since mid-June, threatening further risks to an economy that is expected to post its slowest growth in a quarter of a century this year.
The Shanghai Composite Index gained 2.3 percent by midday, having bounced 18 percent from a four-month low hit last Thursday.
Amid signs of the market freezing up as companies scrambled to have trading in their shares suspended, the People's Bank of China said it was watching closely and would guard against systemic regional financial risks.
The benchmark S&P BSE Sensex is up a mere 1 percent year-to-date, lagging far behind China`s Shanghai Composite - the region`s top performer - which is up 32 percent even after taking into account its recent 20-plus percent pullback.
China's inflation in May came in lower than expected, offering more evidence that Asia's largest economy is stalling and suggesting more easing may be on the way.
An estimated 10,000 to 20,000 jobs will be axed, Sky News said, citing unidentified sources. The number has not yet been finalised and Gulliver will lay out the plans at an investor presentation on June 9, the broadcaster said.
The market was also spooked by domestic media reports that state-owned Central Huijin Investment Ltd has been slashing holdings in exchange-traded funds tracking main indexes.
The HSBC/Markit Purchasing Managers' Index (PMI) fell to 48.9 in April - the lowest level since April 2014 - from 49.6 in March, as demand faltered and deflationary pressures persisted.
China markets pulled back modestly following the data; Shanghai Composite fell deeper into negative terrain, down 0.3 percent, while the Hang Seng index trimmed gains to 0.6 percent from 0.8 percent.
Overnight, US stocks gave up gains in the minutes before the close as investors eyed continued gains in oil and the US dollar ahead of the unofficial start of earnings season on Wednesday.
The brokerage sees the benchmark Kospi at 2,350 by the end of 2014, a far cry from its current level of 2,011. For 2013, the index is up a meager 0.7 percent, compared with the Hang Seng Index`s 3 percent gain and the Taiex`s 12 percent rise.