Japan stocks hit 7-year high, but rest of Asia falls on oil rout

Japanese shares rose to a seven-year high on the first day of the month, while the rest of Asia's indices declined on plunging oil prices and key Chinese data.

Oil markets continued their downwards spiral on Monday with U.S. crude and Brent crude trading at their weakest levels since 2009, sending energy stocks sinking and airlines rallying. Prices have been in free fall following OPEC's (Organization of the Petroleum Exporting Countries) decision to maintain production on Thursday.

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"There is a possibility that if this price war become unmanageable, we could see prices down about $40 per barrel." said Jonathan Barratt, chief investment officer at Ayers Alliance Securities.

Precious metals were in focus with spot gold tumbling 2 percent and silver sliding 6 percent to a five-year low after Swiss voters rejected proposals to boost gold reserves over the weekend.

Investors also digested two separate gauges of Chinese November factory activity on Monday. The official purchasing manager's index (PMI) fell to 50.3, missing estimates for a 50.6 figure and slowing from October's reading of 50.8. Meanwhile, HSBC's final reading hit a six-month low of 50, in line with the bank's preliminary figure but lower than October's final reading of 50.4

ASX 200
CNBC 100

Nikkei rallies 0.7%

Japan's benchmark index ended at its highest level since 2007 after data showed corporate capital expenditure rose 5.5 percent on year in the July-September period.

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Investors also cheered a weaker currency as the yen hit a seven-year low at 119 per dollar, lifting exporters. Consumer electronic names led the gains; Olympus and Nintendo added nearly 3 percent each.

Airlines also rallied with Japan Airlines and All Nippon Airways up 4 percent each.

Andy Xie: 'Chinese economy is stuck'
Andy Xie: 'Chinese economy is stuck'   

Shanghai flat

Mainland shares reversed gains in the final hour of trade, snapping a seven-session winning streak and moving off a three-year peak hit earlier in the day.

Financials rose on news that Beijing issued draft rules for insuring bank deposits, a big step forward in liberalizing the financial sector. Huatai Security surged 10 percent, China Merchants increased 4 percent and Everbright Bank rallied over 3 percent.

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Meanwhile, Hong Kong shares lost 2.5 percent to hit a one-week low with Standard Chartered shares down 1.5 percent after Standard and Poor's lowered the bank's credit rating.

ASX down 2%

Australia's benchmark S&P ASX 200 dropped to its weakest level since October 14 while the Australian dollar skidded nearly 1 percent to a four-year low against the greenback.

Resource stocks led the declines on the back of lower oil and gold prices. In the energy sector, Santos ended over 9 percent lower and Oil Search closed down 8.5 percent.

Read MoreCan oil fall all the way to $40?

Meanwhile, gold miners Evolution Mining plummeted 16 percent and Endeavor Mining declined nearly 13 percent. Iron ore miners also suffered; Fortescue Metals led losses by 10 percent.

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Kospi falls 0.8%

South Korean shares dropped to a one-week low while the won hit a 15-month low against the greenback after November exports unexpectedly declined 1.9 percent from a year earlier.

Shipbuilders were among the biggest losers on the Kospi due to oil's slide; Hyundai Heavy Industries and Hyundai Mipo Dockyard fell over 4 percent each.

Read MoreAsia looks to China PMIs, Australia GDP this week

Nifty down 0.4%

Indian shares slipped back after hitting record highs on Friday. Spicejet surged 14 percent and Jet Airways climbed 7 percent.