Asian shares lost ground on Tuesday as caution over recent strong gains caused indices to move off session highs, offsetting the impact of a record close for Wall Street shares.
Japan's Nikkei and Australia's benchmark came off four-and-a-half year peaks, South Korea's Kospi pared earlier gains to fall below the 2,000-mark, and Greater Chinese markets extended the previous day's losses.
The market pullback comes after a recent rally across global equities on generally improving sentiment about the economic outlook. The Dow Jones index of blue-chip U.S. stocks is up more than 10 percent so far this year, London's FTSE 100 hit a five-year peak on Monday, while Japanese and Australian stocks briefly hit their highest levels since 2008 on Tuesday.
One analyst told CNBC that investors should not hold back for fear of a market correction. "We've had the inconclusive Italian elections, Chinese data over the weekend that were slightly mixed, upcoming September elections in Germany so there are enough worries out there, but I don't think this will cause markets to fall 15-20 percent as we saw back in 2012," said Vasu Menon of OCBC Bank.
Nikkei Retreats
Tokyo stocks snapped an eight-day winning streak as signs of overheating began to emerge. The index has rallied nearly 19 percent since the start of 2013 on the back of a weaker yen and investors took profits after the recent rapid rally.
The yen came off an earlier three-and-half-year low against the dollar and some investors are skeptical if the currency can extend its decline. "I've a pretty neutral outlook for dollar-yen. Economic optimism may be very high but later on this year the risks are that we start to see dollar-yen shifting in the opposite direction as we see limited follow-through," said Robert Rennie of Westpac Bank.
(Read More: )
In Sydney, weaker commodity prices caused the resource sector to sag, dragging the benchmark off its highest levels since September 2008.
Beadell Resources slumped 6 percent and Whitehaven Coal lost 5.5 percent. A stronger U.S. dollar may also explain the weakness in the resource sector as it can slow sales of dollar-denominated commodities to foreign buyers.
Mainland Shares Fall
Shanghai markets posted a fourth-straight daily loss after a sell-off across the Chinese banking sector caused the benchmark index to lose over 1 percent.
China Minsheng Bank led losses by 4.7 percent while Hua Xia Bank fell over 3 percent after official media reported the nation's banking regulator launched a nation-wide probe of wealth management products.
Industry group China Association of Automobile Manufacturers (CAAM) reported that auto sales rose over 19 percent in January and February but that didn't spark a much of a reaction in share prices. Great Wall Motor slipped 3.8 percent while Dongfeng Automobile eased 1.6 percent.
(Read More: The Only Thing Stocks Fear? That No One's Afraid)
In Seoul, concerns of a weaker yen offset the benchmark's earlier gains. Exporters have been on a sustained losing streak in recent days as the won struggles to keep up with the yen's rapid pace of depreciation.
The Japanese currency has weakened nearly 9 percent against the Korean won since the start of 2013, giving Japanese exporters greater profitability over Korean counterparts.
"As the yen seems to be edging inextricably higher towards a 100 (against the dollar), I think there is rising angst and that's being reflected in the Korean won being the under performer as far as regional equities are concerned," said Ray Attrill, co-head of foreign exchange strategy at National Australia Bank.