Chinese shares tumbled Thursday amid tighter liquidity, but other markets in Asia settled higher.
The tumbled to end down 187.47 points, or 6.4 percent, at 2,741.41 to around a three-week low, while the Shenzhen composite dropped 137.80 points, or 7.34 percent, to 1,738.66.
"Liquidity is tightening again in the market, and global negative tone feeding through leading to profit taking in small caps," Michael Every, head of financial markets research for Asia Pacific at Rabobank, told CNBC by email about the sell-off on the Chinese mainland.
Transportation and financials plays were some of the biggest losers on the main index, with shares of China Shipbuilding closing down 10.01 percent.
Concerns were raised over China this week after the People's Bank of China set the yuan mid-point rate notably lower at 6.5273 to the dollar on Tuesday, down 0.17 percent from Monday's fix, indicating policymakers may want the Chinese currency to strengthen. Today's mid-point was set at 6.5318.
Analysts' expectations for China's stock market remain grim.
"Despite the (economic growth) stabilization effort, we believe that the persistent renminbi depreciation pressure, continued deceleration of China's growth and worsening economic structure (soaring property prices and rising leverage) will weigh on the stock market in the near term," CIMB said in a note Wednesday.
The earnings outlook could also be worse than expected. Credit Suisse said in a note Thursday that it expects return on equity (ROE) for China-listed nonfinancial companies will only be 7.3 percent this year, similar to last year. That implies that this year's earnings growth will only be around 8 percent, compared with consensus forecasts for 17 percent, the bank said, adding that the implied earnings growth for mainland markets is only 0.6 percent if financial stocks are factored in.
Meanwhile, in Japan, shares of Sharp tumbled as much as 20.11 percent earlier before closing 14.37 percent lower. Reuters and the Nikkei reported that the troubled electronics maker has decided to accept a 659 billion yen ($5.9 billion) takeover bid by Taiwan's Foxconn. Shares of Foxconn, also known as Hon Hai Precision Industry, were up 2.61 percent.
On the upside, the Japanese benchmark index closed up 224.55 points, or 1.41 percent, at 16,140.34. Across the Korean Strait, the Kospi gained 6.04 points, or 0.32 percent, to 1,918.57.
"Japanese markets were enjoying a bit of an oil-induced recovery alongside some weakening of the yen," said Angus Nicholson from IG in an afternoon note. "The yen has not responded well to the introduction of negative rates, and the implicit message is markets want to see asset purchases from the Bank of Japan not further negative rates."
The yen, which surged against the dollar in recent sessions, maintained the 112 handle; the pair traded at 112.16 as of 2.45 p.m. HK/SIN time. A stronger yen is usually a negative for Japan's exporters as it reduces overseas profits when converted into local currency. But exporters saw mixed fortune, with Toyota down 0.72 percent, while Canon gained 0.37 percent.
Bank of Japan governor Haruhiko Kuroda told a parliament session that the central bank's decision to adopt negative interest rates was having the intended effects. Reuters reported Kuroda said the positive effects will spread to capital expenditures and housing investment.
Australia's S&P/ASX 200 closed up 6.15 points, or 0.13 percent, at 4,881.17. That followed two consecutive sessions of declines for the main index, which closed down 2.1 percent on Wednesday.
Online job-search company Seek was one of the top gainers on the index, closing up 7.88 percent. The company reported a 50 percent jump in interim net profit to A$275.1 million ($198.2 million), and a dividend of 21 Australian cents per share. The sale of Seek's education business, IDP Education, and strong revenues from China helped boost profit.
Oil prices retreated again in Asian trading hours, with U.S. crude dropping 0.84 percent to $31.88 a barrel, after settling up 0.88 percent in overnight trade. Global benchmark Brent was lower by 0.70 percent at $34.17 a barrel as of 2.47 p.m. HK/SIN time, following a 3.4 percent gain during U.S. hours.
The overnight bounce came as data showed U.S. gasoline demand over the past four weeks rose more than 5 percent compared with a year earlier. But U.S. government data showed crude stockpiles rose 3.5 million barrels last week to more than 507 million barrels.
"The market...was looking for some good news for once and took its cue from falling gasoline inventories and gasoline demand up 1.8 [percent], a hint that the long-looked-for increase in consumer-led driving and spending might be afoot," said David de Garis, a director and senior economist for fixed income, currencies and commodities at National Australia Bank, in a morning note.
Oil came under pressure this week after Saudi Arabia's oil minister dashed hopes for a possible production cuts.
In foreign exchange markets, sterling remained weak against the dollar on concerns over a possible "Brexit," or the possibility that the U.K. could exit the European Union. The pair traded at 1.3911 as of 3.25 p.m. HK/SIN.
Stateside, the closed up 0.3 percent, erasing a 266-point intraday drop. The S&P 500 gained 0.44 percent after trading more than 1 percent lower intraday and the was up 0.87 percent.