Asia report: China drags whole region down

Asian stocks were dragged lower on Tuesday, as another shocker session in China led to region-wide declines.

The Shanghai Composite Index closed down 6.42% to 2,749.79, which was its lowest close since December 2014. The index was down 47% from its pre-crash peak in June 2015.

It was also the largest single-day percentage loss since Beijing abolished the circuit-breaker mechanism on January 8. The mechanism, which was designed to prevent panic sales after large market-wide losses, was only in place for a week.

It was blamed for sparking volatility, instead of dampening it.

Elsewhere in China, the technology-heavy Shenzhen Composite Index closed down 7.12% and the ChiNext benchmark plunged 7.78%.

Sentiment in the People's Republic had remained muted ahead of the Chinese New Year, which begins on 7 February, according to Reorient Group director Steven Wang.

He said investors were concerned about capital outflows from the mainland, with "people looking for support at 2,500 (on the Shanghai Composite)", in a note.

Over in Hong Kong, the energy sector dragged the Hang Seng Index down 2.48%. The mainland also had an effect, with the Hang Seng China Enterprises Index dropping 3.4%.

That index - which represents mainland firms trading in the special administrative region - hit its record low last Thursday, and on Tuesday was trading at its lowest levels in seven years.

On the peninsula, Seoul's Kospi was down 1.2%, and over in Tokyo the Nikkei Stock Average closed down 2.35%.

Tokyo-listed oil firm Inpex Corporation was down 4.31%, as oil continued to trade near multiyear lows. Brent Crude did see some early action in Asia, but gave up those gains to hit $29.72 per barrel by the time the region closed.

At 1030 GMT, Brent was trading at $30.36 per barrel and West Texas Intermediate was at $30.15.

"The volatility is not helping resotre confidence back in the market. It's not easy to put on new bets", said CLSA head of Asian sales and trading Robert Levine.

Oil's losses weren't helping Asian airlines, however, with China Southern dropping 6.68% and Japan Airlines slipping 0.63% on Tuesday. Levine said worries about slower global growth were overshadowing the benefits of lower oil.

Traders in Sydney had swapped trading floors for backyard barbecues on Australia Day, and India's markets were also closed for Republic Day.

In Wellington, the S&P/NZX 50 fell 0.5%, with local analysts blaming the Australian holiday as leaving investors without their traditional trans-Tasman lead.

On the currency markets, the Aussie dollar strengthened 0.1% against the greenback to AUD 1.4363. The Kiwi weakened 0.14% to NZD 1.5512, and the yen gained 0.03% to JPY118.26.