China Tumble Leads Asia Down; Nikkei Up

Asian stocks fell on Monday, dragged down by a slide of 3.7 percent in Shanghai following fresh property curbs. Japanese shares, however, briefly touched a fresh four-and-a-half year peak as comments from the government's nominee as the next Bank of Japan governor fueled hopes for aggressive monetary easing.

The Shanghai Composite, China's benchmark stock index, fell to its lowest level in six weeks, while the CSI300 index of the top Shanghai and Shenzhen listings encountered its steepest daily loss since November 2010. The Hang Seng Index shed 1.5 percent.

The sharp selloff in China weighed on markets elsewhere in Asia, pushing the Nikkei off its 11,700-mark, while Australia's ASX 200 closed down 1.5 percent and Seoul's Kospi, which resumed trade after Friday's public holiday, slipped 0.6 percent.

China's Property Slump

Major property developers such as Gemdale and Poly Real Estate plunged 10 percent in Shanghai after Beijing on Friday announced an increase in down payments and loan rates to contain rising home prices.

One expert told CNBC Asia's "Cash Flow" that investors should not be scared off by the market's tumble.

(Read More: New 'Powerful Force' to Underpin Stock Rally)

"The property measures have been discounted by the market and if you look at the big-cap property stocks, they are still well-below recent lows so I don't think we are in a bear market," said Alex Wong, director of asset management at Ample Capital.

Focus is expected to turn to China's annual parliamentary meetings this week for signs of further property curbs. The annual Chinese People's Political Consultative Conference began on Sunday and the National People's Congress starts on Tuesday. The Congress is expected to confirm Xi Jinping as president

Tough Talk From Kuroda

Japan was the rare bright spot in Asian markets mired in negative territory, with comments from the government's nominee as next Bank of Japan (BOJ) governor helping to support shares.

The benchmark index closed at 11,652.2 points after initially crossing the 11,700-mark earlier in the session, a fresh four-and-a-half-year high.

Haruhiko Kuroda, testifying to Japan's lower house of parliament, said the central bank must take more aggressive easing steps to fight deflation, suggesting the central bank expand the size and the types of bonds it buys.

Kurodo, head of the Asian Development Bank, is widely expected to become the next BOJ governor and implement radical monetary easing measures to end years of deflation that have dogged Japan's economy.

Hopes of bold monetary policy action continued to bolster real estate stocks, one of the best performing sector on the Tokyo stock exchange. Heiwa Real Estate soared 9 percent while Sumitomo Realty and Development added 4 percent.

Sydney Falls on Resources

Lower metal prices sparked a selloff in Australia's resource sector with gold miner St Barbara diving 10 percent while global miners BHP Billiton and Rio Tinto tumbled over 3 percent.

Australia's central bank meets on Tuesday and analysts said markets should not rule out an interest rate cut following recent data such as numbers last week that showed business investment surprisingly fell in the fourth quarter of 2012.

(Read More: Rate Cut in Sight as Aussie Firms Cut Back Spending )

"Last week's business investment and capex (capital expenditure) number were weak, inflation is low and there's no growth coming out of the housing recovery yet," said Martin Lakos, division director at Macquarie Private Wealth. "We think we can see rates as low as 2 percent so we are expecting a cut tomorrow."

A majority of economists polled by Reuters expect the Reserve Bank of Australia to keep rates steady at 3 percent.