Mainland equities sold off sharply in the final hour of trade on Tuesday, leading the losses in Asia amid a renewed selloff in oil and caution ahead of the Federal Reserve's monetary policy decision.
China's Shanghai Composite widened losses to more than 6 per cent, hitting its lowest level since December 2014 and giving up all of Monday's gains. Year-to-date, the index is already 22 per cent lower.
News that the People's Bank of China conducted its biggest daily open markets operation in three years failed to lift sentiment. The central bank injected 360 billion yuan (S$78.3 billion) into money markets on Tuesday in an attempt to boost liquidity ahead of the Lunar New Year holiday.
Oil majors such as PetroChina and Sinopec tumbled 5 per cent each as US crude fell below US$30 (S$43) a barrel on Tuesday.
Oversupply fears were to blame for oil's rout after Iraqi officials told Reuters on Monday that the country had record output in December, with certain fields producing as much as 4.13 million barrels a day.
The decline in oil helped push US stocks sharply lower Monday, with the S&P 500 and Nasdaq more than 1.5 per cent lower and the Dow Jones Industrial Average off by almost 1.3 per cent as investors awaited a swath of major earnings reports, data and the Federal Reserve's policy statement later in the week. The US central bank begins a two-day meeting on Tuesday local time, but no rate action is expected. Still, attention will fall on its post-meeting statement Wednesday local time for commentary on recent market volatility.
In Greater China, Hong Kong's Hang Seng Index slipped 2.5 per cent, with CNOOC leading the losses by 6 per cent.
Japan's benchmark Nikkei index snapped a two-day winning streak, losing more than 2 per cent.
Auto parts makers were in focus amid reports that auto parts makers are in the cross hairs of European regulators. Denso, Mitsubishi Electric and Hitachi closing down more than 3 per cent each after Reuters reported they are set to be fined for allegedly fixing parts prices; the amount could come up to 10 per cent of their global turnover.
McDonald's Japan slid 2.5 per cent on news the US parent firm may be considering selling a portion of its stake in the Japan business.
Steel plays also weakened after data on Monday showed 2015 steel exports fell to a four-year low; Kobe Steel and JFE Holdings lost 6 and 5 per cent, respectively.
In South Korea, the benchmark Kospi eased more than 1 per cent after closing at a more than one-week high on Monday. Data released before the market open showed fourth-quarter gross domestic product more than halved, with growth rising a slower-than-expected 0.6 per cent on quarter, from a 1.3 per cent rise in the previous period.
"Overall for 2015, growth weakened to 2.6 per cent from 3.3 per cent in 2014 owing mainly to the MERS effect on private demand along with a sluggish external environment. Looking ahead, we expect a modest rebound in 2016 to 3.1-3.2 per cent as G3 economies continue to recover. Meanwhile, being a major oil importer, Korea should benefit from soft oil prices above all," said Mizuho economists in a morning note.
Hyundai Motor and LG Electronics fell 1 and 3.5 per cent, respectively, ahead of reporting earnings later in the day.
Among emerging markets, Philippine shares tumbled more than 1 per cent while the peso crashed to a six-year low.
Australian markets are shut for the Australia Day public holiday.