China's benchmark index fell after hitting a near two-week high in the previous session on the back of HSBC's disappointing PMI data. Larger losses were capped after the People's Bank of China injected its biggest weekly funding since February 2013 into interbank markets.
Investors also digested data that showed fiscal revenues rose an annual 10 percent in 2013.
Industrial and Commercial Bank of China fell 0.9 percent following reports that the Shanxi provincial government may help bail out investors in an investment product that was marketed by the lender.
The rest of the banking sector also declined despite data showing higher annual loan growth in January. Bank of China and China Construction Bank skidded over 1 percent.
In Hong Kong, the benchmark Hang Seng Index fell 1.5 percent to a more than one-week low.
Nikkei slips 0.8%
Japan's benchmark index reversed gains to close in negative territory after hitting a two-week high of 15,958 earlier in the session.
(Read more: Is the Japan story getting threadbare?)
Investors dismissed a Reuters poll that indicated business sentiment was set to improve for a third consecutive month in January, while Prime Minister Shinzo Abe's pledge to cut corporate taxes at the World Economic Forum on Wednesday also failed to lift sentiment.
Textile company Unitika was one of the biggest losers, down over 4 percent. But offsetting the losses, Japan Aviation Electronics surged 14 percent after raising its annual earnings forecast for the second time this fiscal year.