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Sell-offs spread across global financial markets over fears about the US financial system and uncertainty regarding the rescue package for US mortgage giants Fannie Mae and Freddie Mac.

Hong Kong's Hang Seng Index dropped 3.8 per cent and Taiwan's benchmark lost 4.5 per cent. In Tokyo, the Nikkei 225 Index dropped nearly 2 per cent.

Financial stocks were hit hard as investors worried that trouble in the US financial markets would spill over to Asia.

Even the government's Bt46-billion anti-poverty package failed to boost the market, in which turnover was Bt13.7 billion.

The selling pressure yesterday was seen in large market-cap stocks. PTT fell 5.59 per cent to Bt270, Siam Commercial Bank 5.33 per cent to Bt71 and Kasikornbank 4.55 per cent to Bt63. Thai Airways International lost 11.76 per cent at Bt15 - its lowest point in 16 years - on anxiety that the national carrier's earnings would be hurt by soaring fuel costs.

Thai shares have fallen in Asia's 10th worst-performing stock market, with a 19.19-per-cent slump year to date.

Japanese traders were rattled by a local business newspaper's report that the country's top three banks held a combined ¥4.7 trillion (Bt1.5 trillion) worth of Fannie Mae and Freddie Mac debt. Another newspaper report unnerved Taiwan's market with news that at least two leading financial institutions there had invested in the mortgage giants and that the country's central bank might also have purchased their bonds.

In China, rumours were circulating that the Chinese government had also invested in Fannie Mae and Freddie Mac bonds.

The two government-chartered companies received a boost on Sunday when the US central bank and the 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 of the outstanding mortgages in the United States.

An overnight sell-off of regional banks on Wall Street and fears that other US banks may face difficulties ahead only added to the unease.

"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 US," said Alex Tang, head of research at Core Pacific-Yamaichi in Hong Kong.