(Adds analysis, quotes, stocks on the move)
SYDNEY Jan 28 Australian shares slipped to 1-1/2 month lows on Tuesday morning as turmoil in emerging markets triggered across-the-board selling.
Sydney was playing catchup to a global selloff in riskier assets as worries grew about a slowdown in China's economy and a further paring of monetary stimulus by the U.S. Federal Reserve.
The S&P/ASX 200 index fell 29.4 points to 5,211.5 by 0128 GMT, after dipping 0.9 percent to 5,158.9 earlier, lows last seen in mid-December. The market, which gave up 1.2 percent last week, was closed on Monday for a public holiday.
The benchmark has had a lacklustre performance so far in 2014, and is set to post a 3.1 percent fall in January, its biggest one-month decline since June 2013.
Selling on Tuesday was broad-based, with financials, mining and defensives losing ground as investors fretted that the current period of anxiety in markets could drag on.
Political risks in Ukraine, Turkey and Thailand, as well as a looming financial crisis in Argentina, are compounding the problem of emerging markets, in a week where the Federal Reserve is widely tipped to cut its monthly bond purchases by another $10 billion.
"As the rallies in emerging markets topped out and the U.S. Fed Reserve signalled the beginning of the end of quantitative easing, things started to go a bit pear-shaped for emerging markets and liquidity began to dry up," said Scott Schuberg, CEO of Rivkin Securities in a research note.
All four 'Big Banks' posted losses, led by Commonwealth Bank of Australia falling 1.2 percent and Australia and New Zealand Banking Group declining 1.4 percent
Mining stocks also took a beating as copper hit its lowest in seven weeks overnight, while gold fell around 1 percent.
Bluechips BHP Billiton Ltd and Rio Tinto Ltd shed 1.7 percent and 1.5 percent respectively, while PanAust Ltd tumbled 4 percent.
Positive news on the Australian business front prompted some investors to buy back oversold stocks.
A measure of Australian business conditions jumped to its highest in more than 2-1/2 years in December, as sales and profitability improved markedly, while confidence held steady at long-run average levels, helping to lift the index from session lows.
Among defensive stocks, grocer Woolworths Ltd slipped 0.8 percent while biotech company CSL Ltd shed 1 percent.
McPherson's Ltd plumbed 11.4 percent to near three-month lows of A$1.36, after the company said it sees its first half statutory profit after tax at around A$9 million, 17.8 percent below the previous corresponding period.
JB Hi Fi Ltd, one of the few to buck the market, jumped 7.3 percent after the Australian electronics and entertainment retailer said its total sales for the six months ended December 31 climbed 6.8 percent to A$1.94 billion.
New Zealand's benchmark NZX 50 index slipped 0.3 percent to 4,839.8.
(Reporting by Thuy Ong; Editing by Shri Navaratnam)