China stocks suffer biggest one-day loss in 5 months

China's Shanghai Composite index crashed more than 7 percent on Friday amid increasing worries that the country's bull run is running out of steam. Risk-off sentiment from the mainland also cast a shadow on regional bourses, which mostly ended in negative territory.

"Reasons for the slump in China stretch far and wide, including deleveraging, frothy valuations and extreme volatility causing nervousness. While some markets in the region seem to have ignored some of the wild swings in China for a while, it's now certainly casting a shadow on some key markets," IG's market strategist Stan Shamu wrote in a note.

Dwindling hopes of a Greek deal also weighed on sentiment, as the Eurogroup meeting of finance ministers quickly ended without any signs of an agreement on Thursday. German chancellor Angela Merkel said a euro zone finance ministers' meeting over the weekend would be decisive for finding a solution to Greece's debt crisis.

Overnight, U.S. equities finished a quiet session with modest losses, as a lack of resolution between Greece and its foreign creditors kept traders on the sidelines. The Dow Jones Industrial Average and S&P 500 shed 0.4 and 0.3 percent, respectively, while the tech-heavy Nasdaq slipped 0.2 percent.

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Mainland markets in free fall

The Shanghai bourse accelerated its pace of decline in the afternoon session, extending Thursday's violent sell-off precipitated by increasing signs of deleveraging and persisting concerns over a flood of new-share listings.

The benchmark Shanghai Composite plunged 7.38 percent - marking its worst single-day loss since January 19 - to its lowest level since May 8. For the week, the bourse eased 9.58 percent.

The blue-chip CSI 300 index plummeted 7.8 percent to a more than two-month trough, while the smaller Shenzhen Composite retreated by the same margin to close at its lowest level since May 19. The start-up ChiNext board was the hardest-hit, diving 8.4 percent to settle at a more than one-month low.

The unwinding of bets by leveraged investors appear set to be one of the key risks that is deflating China's world-beating rallly. According to figures provided by IG, the margin debt level has fallen 4 percent since June 18. With margin lending being a key driver of the mainland's stock market, a sudden shift in sentiment among margin traders could put the brakes on the blistering run-up, analysts warned.

Read MoreWhy Chinese stocks could slide 50 percent

Some experts have also issued bubble warnings. "After being the worst performing stock market for 6 years, the domestic A-share market caught up with a vengeance [but] a rise of 150 percent in a short period of time is excessive by any standard of imagination," Stephen Roach, senior fellow at Yale University, told CNBC Asia's "Squawk Box."

"Even though the market is not terribly overvalued in a forward PE basis, the rate of acceleration is a classic bubble and some of that is coming off right now," Roach added.

By contrast, Guotai Junan Securities — China's third-largest brokerage by profits — leaped 44 percent on its market debut in Shanghai. The listing follows an initial public offering (IPO) which raised 30.1 billion yuan ($4.85 billion) and will be China's largest IPO since 2010.

In Hong Kong, the Hang Seng index tracked weakness in its mainland peers to close down 1.8 percent.

Nikkei sheds 0.3%

Japan's Nikkei 225 index nursed modest losses even though data released before the market open came in better than expectations.

Japan's core consumer price index (CPI) ticked up 0.1 percent from a year earlier in May, just a tad above Reuters' expectations for a flat reading. The unemployment rate was steady at 3.3 percent in May, in line with expectations, while household expenditures beat estimates to rise 4.8 percent on-year. According to a Reuters poll, household spending was expected to gain 3.4 percent on-year.

Some export-oriented counters recovered from the selloff earlier in the session; Honda and Toyota Motor trimmed losses to 0.6 and 0.1 percent, respectively, while Suzuki Motor and Nissan rebounded more than 2 percent each.

Construction and mining equipment maker Komatsu extended losses to drop nearly 1.4 percent.

Meanwhile, airbag manufacturer Takata's chief executive broke his silence on Thursday and apologized after months of avoiding the spotlight. Shares of the company, which made faulty airbags that triggered the largest recall in automotive history, edged up 0.2 percent.

Read MoreJapan says no to China's big bank plans...for now

ASX skids 1.5%

Australia's S&P ASX 200 index finished the week at a one-week low amid a broad-based selldown.

Market bellwether BHP Billiton and Fortescue Metals plunged 3.5 and 6.1 percent, respectively, after iron ore prices slipped to $61.30 a tonne overnight. Energy plays also suffered heavy declines, with Santos and Woodside Petroleum shaving off more than 2 percent each.

Financials also came under selling pressure. Among the four major lenders, Australia and New Zealand Banking and National Australia Bank plummeted more than 1 percent each.

Bradken widened losses to more than 10 percent after announcing that it received a merger approach from a unit of Chile's Sigdo Kippers.

Shares of Qantas ended down 3.7 percent on news that the Hong Kong Air Transport Licencing Authority (ATLA) rejected the national carrier's application to start a new budget airline.

Outperforming the bourse, Woolworths surged 3.8 percent on speculation that it could be a takeover target.

Kospi adds 0.3%

South Korea's key Kospi index reversed a disappointing open to touch its peak in more than 3 weeks, thanks to a rebound in index heavyweights.

Samsung Electronics retraced some of the ground lost Thursday, bouncing up 0.7 percent, while Hyundai Motor piled on 2.3 percent.

Snack maker Orion tumbled 7.8 percent following its announcement that it submitted a preliminary bid on Wednesday for Homeplus, British retailer Tesco's South Korean unit. Chipmaker SK Hynix closed down over 2 percent after rival Micron Technology posted a miss in third-quarter profit and revenue.