Investor uncertainty grew today on concerns over the US economy and news that three Asian banks reported multi-billion-dollar exposure to the US subprime mortgage crisis.
Asian stocks fell, led by financial firms and exporters, while Japanese government bonds edged up.
More bad news came when three of Asia's biggest banks revealed a combined exposure to the US subprime mortgage market of almost $13 billion.
Shares in Singapore's DBS Group Holdings, Southeast Asia's biggest bank; state-controlled Bank of China; and its Hong Kong subsidiary, BOC Hong Kong, all skidded today.
The news raised fears that Asian banks, generally domestically focused and risk averse following the Asian financial crisis 10 years ago, were not as immune to the subprime crisis as investors had thought.
Still, financial markets have been calmer and more stable this week after the recent turmoil that shook stocks and sent investors scurrying for the safety of government debt.
MSCI's measure of Asia Pacific stocks, excluding Japan, has rebounded 13 per cent since hitting a five-month low last Friday.