Stocks in Hong Kong led losses regionally among major Asian markets on Tuesday after ratings agency Moody's cut its rating for the city to Aa3 from Aa2 on Monday.

The Hang Seng index in the city fell 2.67%, as of its final hour of trading, with shares of life insurer AIA plunging beyond 3%.

Chinese tech behemoth Tencent also dropped 2.88%, after the firm's Chairman Pony Ma reportedly sold $2 billion Hong Kong dollars (approx. $257.31 million) worth of shares, according to Reuters.

The moves came following the ratings downgrade from Moody's on Monday, where the agency also changed its outlook for Hong Kong to stable from negative. The city has been plagued by months of protests that have periodically degenerated into violence, with seemingly no resolution in sight.

"The downgrade principally reflects Moody's view that Hong Kong's Institutions and Governance Strength is lower than previously estimated," the ratings agency said in a statement.

Still, one economist told CNBC on Tuesday that the downgrade "probably isn't a big thing."

"How much of this is actually gonna have an impact on the real activity? Probably not a lot," Sian Fenner, lead Asia economist at Oxford Economics told CNBC's "Street Signs" on Tuesday.

Meanwhile, mainland Chinese stocks also declined on the day. The Shanghai composite shed 1.41% to about 3,052.14 while the Shenzhen component fell 1.46% to 10,953.41. The Shenzhen composite shed 1.28% to approximately 1,806.54.

Elsewhere, the Nikkei 225 in Japan closed 0.91% lower at 23,864.56 while the Topix index declined 0.53% to end its trading day at 1,734.97. In South Korea, the Kospi was 1.01% lower to close at 2,239.69.

The Bank of Japan (BoJ) kept its short-term policy rate unchanged at -0.1% while keeping its 10-year Japanese government bonds yield target around 0%, largely in line with expectations.

In its outlook for economic activity and prices, the Japanese central bank said the country's economy is "likely to continue on an expanding trend" through fiscal 2021.

Shares in Australia also dipped, with the S&P/ASX 200 closing 0.19% lower at 7,066.30.

Overall, the MSCI Asia ex-Japan index dropped 1.31%.