Fears over the extent of U.S. financial woes have rattled Asian markets, despite U.S. government attempts to shore up investor confidence. Heda Bayron reports from Hong Kong.
Stocks in Asia fell sharply Tuesday. Hong Kong's Hang Seng index plummeted nearly four percent, while Japan's benchmark Nikkei 225 index fell two percent to its lowest level in more than three months.
Across Asia, analysts say investors dumped shares, worried about the health of the U.S. financial sector and its effect on Asian companies.
Kingston Lin, associate director at Prudential Brokerage in Hong Kong, says the U.S. government's move to help troubled mortgage lenders Fannie Mae and Freddie Mac failed to dispel those fears.
"It's useless, because the confidence is not coming back. So I think the market will continue to drop," he said.
The two lenders hold or guarantee about half the outstanding mortgages in the United States.
The Federal Reserve and the Treasury Department promised short-term funding and other aid Sunday.
Shares in Asian banks were big decliners Tuesday, as investors feared possible exposure to Freddie Mac and Fannie Mae debt.
Japan's biggest banks, Mitsubishi UFJ Financial Group and Mizuho Financial Group, both dropped about five percent. Japanese media reported that the two banks hold significant amounts of Freddie Mac and Fannie Mae bonds.
Shares in China's biggest bank, ICBC, also declined more than five percent.
Taiwan's weighted index closed four and a half percent lower to a 22-month low. Taiwan financial institutions hold an estimated $23 billion in Fannie Mae and Freddie Mac bonds.
South Korea's KOSPI fell 3.2 percent, to its lowest close in 15 months.
U.S. Federal Reserve Chairman Ben Bernanke and Treasury Department Secretary Henry Paulson are to testify before Congress Tuesday on the current financial turmoil.