Every major index was in the red by midday, with Hong Kong's Hang Seng Index dropping 3.2 percent and Taiwan's benchmark losing nearly 4 percent at one point.
In Tokyo, the Nikkei 225 index shed 2 percent to 12,750.10.
While losses spread across most sectors, banks were hit particularly hard as investors worried that trouble in the U.S. financial markets would spillover to Asia. Japanese traders, for instance, were rattled by a local business newspaper report that the country's top three banks hold a combined 4.7 trillion yen ($44 billion) in Fannie May and Freddie Mac debt.
Those two government-chartered companies received a boost Sunday when the U.S. central bank and Treasury Department promised to step in with short-term funding and other aid should mortgage losses mount. Together, the companies hold or back about half the outstanding mortgages in the United States.
"Investors are quite concerned we could be heading toward a meltdown in the equities market if there's no rebuilding in confidence, especially in the U.S.," said Alex Tang, head of research at Core Pacific-Yamaichi in Hong Kong.
In Japan, banking giant Mizuho Financial Group Inc.'s shares dipped 3.5 percent and Mitsubishi UFJ Financial Group Inc. was down nearly 4 percent.
Meanwhile, China's biggest lender, ICBC, dropped almost 5.1 percent in Hong Kong trading. China Construction Bank was off 4.9 percent.
China's most-watched index in Shanghai was off 2.5 percent. Elsewhere, South Korea's benchmark slid 2.6 percent, India's Sensex lost 2.3 percent and Australia's main index slipped 2.3 percent.
In currency trading, the dollar declined against the yen to 105.83. The greenback was flat against the euro.
Source: http://news.yahoo.com/s/ap/20080715/ap_on_bi_ge/world_markets;_ylt
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