Asian markets retreated on profit-taking Tuesday after a healthy run-up over the past week, with Shanghai tanking more than five percent, while energy firms took a hiding as oil prices hit fresh five-year lows.
Sydney-listed energy firms including Santos and BHP Billiton were hammered as crude continued to be bid down owing to an oversupply in world markets.
Tokyo dipped 0.68 percent, snapping a seven-session winning streak. The Nikkei fell 122.26 points to 17,813.38.
Sydney tumbled 1.68 percent, or 90.0 points, to close at 5,282.7 and Seoul gave up 0.40 percent, or 8.00 points, to 1,970.95.
Shanghai sank 5.43 percent, or 163.99 points, to 2,856.27 after enjoying a stellar performance since last month when China slashed interest rates unexpectedly.
In late trade Hong Kong was 2.24 percent lower.
Traders took their cash off the table after running up impressive gains so far this month, helped by a string of upbeat US data and expectations China will unveil more economy-boosting measures.
Oil prices fell to fresh five-year lows, battered by OPEC`s decision last month to maintain its output levels despite a global supply glut.
Economic weakness in China, Japan and the eurozone and the strong dollar also pushed down prices.
US benchmark West Texas Intermediate for January delivery fell 52 cents to $62.53 while Brent eased 69 cents to $65.50.
Energy firms bore the brunt of the pain, with Sydney-listed BHP down 4.05 percent at a five-year low and Santos off 7.23 percent to end at levels not seen for a decade.
In Hong Kong CNOOC shed 4.56 percent and PetroChina was 4.34 percent lower.
"This has contributed to intensifying the hand-wringing in the market over the potential for massive oversupply in 2015," Greg Priddy, head of energy and resources at Eurasia Group, said in a report, according to Dow Jones Newswires.
Shanghai, which on Monday broke the 3,000 barrier for the first time in three years, was hammered by profit-taking and news that China`s securities clearing house had tightened the use of corporate bonds as collateral for short-term financing.
The move is part of a bid to rein in risky debt issuances from struggling companies and local governments.
The index has surged 45 percent this year, with much of that coming since the central People`s Bank of China last month unexpectedly cut interest rates, which in turn fuelled hopes for further measures down the line.
The market had rallied in the morning on speculation that authorities are considering a cut to the amount of cash bank must keep in reserve, although that was unable to keep sellers away.
Wall Street provided a tepid lead Monday, with the Dow falling 0.59 percent, the S&P 500 down 0.73 percent and the Nasdaq off by 0.84 percent as US energy firms tumbled along with oil prices.
Tokyo, which has surged since the Bank of Japan in October widened its stimulus programme, eased as the yen ticked up against the dollar.
"Lower oil, lower Wall Street, and a lower dollar should spell long overdue profit-taking for the Nikkei after seven straight sessions of gains," said Shunichi Otsuka, general manager of research and strategy at Ichiyoshi Asset Management.
The greenback bought 120.10 yen compared with 120.78 yen in New York Monday afternoon.
However, the US unit is still near seven-year highs and analysts are predicting further advances as the Federal Reserve considers an interest rate rise.
"Market conviction is growing in a Fed rate hike next year," said Joe Manimbo, senior market analyst at Western Union Business Solutions.
"Still, dollar rallies could get undercut by market profit-taking on its torrid strength while relatively low US yields risk limiting its rise."
In other forex trade the euro bought $1.2316 and 148.63 yen against $1.2308 and 148.65 yen in US trade.
Gold was at $1,200.71 an ounce compared with $1,195.20 late Monday.
In other markets:
-- Taipei fell 0.64 percent, or 58.39 points, to 9,128.90.
Taiwan Semiconductor Manufacturing Co was unchanged at Tw$138.0 while Hon Hai Precision Industry shed 2.07 percent to Tw$90.0.
-- Wellington rose 0.25 percent, or 13.61 points, to 5,542.93.
Air New Zealand was up 0.63 percent at NZ$2.395 and Spark surged 3.24 percent to NZ$3.03.
