Asian stocks fell, led by Kookmin Bank and Commonwealth Bank of Australia, after G7 policy makers said fallout from the US housing slump may further sap global growth.
Kookmin slumped the most in more than three years as South Korean stocks resumed trading after a three-day holiday.
Commonwealth Bank dropped after the nation's central bank said it may raise borrowing costs.
Reliance Power Ltd declined on its first day of trade after it raised US$3 billion last month in India's biggest share sale.
"The likelihood of a US recession now looks pretty high and it's only a question of whether it's going to be a long or short one," said Nicole Sze, a Singapore-based investment analyst at Bank Julius Baer & Co, which manages US$350 billion in assets worldwide.
"There's also no clarity as to whether all the subprime losses have already been accounted for," he said.
The MSCI Asia-Pacific excluding Japan Index lost 2.6 percent to 456.57 as of 4:20pm in Hong Kong, set to close at its lowest since Jan. 23. South Korea's Kospi fell 3.3 percent. India's Sensitive Index slid 4.4 percent, the most in Asia.
Bank of Communications Ltd led Chinese financial companies lower after Goldman, Sachs & Co cut their share-price targets. Hong Kong and Singapore dropped following Lunar New Year holidays. Japan, China and Taiwan were shut yesterday.
US stocks fell on Friday, rounding off the market's first weekly decline since the middle of last month. The Standard & Poor's 500 index has fallen 9.3 percent amid signs of mounting losses tied to investments in subprime, or higher risk, mortgages.
Officials of G7, which consists of the US, the UK, Canada, Italy, France, Germany and Japan, ended a weekend meeting in Tokyo saying "downside risks persist," including the US housing slump and tighter credit conditions. "Growth is expected to slow somewhat in the short term" in "all our economies," they said in a statement.
Kookmin, South Korea's largest bank, lost 6.5 percent to 58,000 won, its steepest decline since June 11, 2004. HSBC Holdings Plc, Europe's biggest bank by market value, slipped 4 percent to HK$109.30 in Hong Kong.
Macquarie Fortress Investments Ltd, an asset manager run by Australia's biggest investment bank, plunged 56 percent to A$0.11 after it was forced to sell US assets at a loss to repay debt. Its parent, Macquarie Group Ltd, lost 3.9 percent to A$60.08.
Commonwealth Bank, the second largest in Australia, dropped 2.8 percent to A$48.75, snapping a two-day, 3.3 percent rally.
Westpac Banking Corp, the country's fourth-biggest bank, slid 2.7 percent to A$24.30. Australia and New Zealand Banking Group Ltd, the third-biggest, fell 3.1 percent to A$24.80.
The Reserve Bank of Australia said it will probably need to increase rates further to cool "uncomfortably high" inflation. The central bank raised rates last week to an 11-year high of 7 percent.
Bank of Communications, minority owned by HSBC Holdings Plc, lost 6 percent to HK$8.58 in Hong Kong. Bank of China Ltd, the third-largest Chinese bank, slipped 4.4 percent to HK$3.02. China Construction Bank Corp, the second-biggest, fell 5.5 percent to HK$5.36.
Goldman cut its 12-month share-price estimate for Chinese banks by as much as 31 percent. The reductions came amid concerns of slowing profit growth owing to rising interest rates, analysts at the brokerage including Ning Ma said in a note yesterday.
A measure of financial shares was the biggest drag among the MSCI benchmark's 10 industry groups.
Samsung Electronics Co, Asia's largest maker of flat panels, chip and mobile phones, declined 4.7 percent to 584,000 won.
LG.Philips LCD Co, the second-biggest maker of liquid-crystal displays in the world, slipped 1.1 percent to 40,400 won.
South Korea resumed trading after a three-day holiday during which the MSCI Asia Pacific Index, which includes Japan, dropped 4.2 percent after a surprise contraction in US service industries fueled concern that the world's largest economy is in a recession.
A separate US report showed pending home sales dropped to the second-lowest level since the National Association of Realtors began keeping records in 2001.
"There's no doubt that slower growth in the US will cut growth in other parts of the world," said Troy Angus, who helps manage the equivalent of US$3.5 billion at Paradice Investment Management Ltd in Sydney.
Reliance Power plunged 13 percent to 391.5 rupees, after earlier slumping as much as 14 percent. The unit of Reliance Energy Ltd, India's second-biggest utility by market value, sold its stock at 450 rupees in an initial offering. Investors ordered shares valued at as much as US$189 billion.
Reliance Energy tumbled 16 percent to 1,650 rupees.
Ansell Ltd, the biggest maker of surgical gloves in the world, jumped 3.5 percent to A$11.90 after saying that its first-half profit increased 28 percent.
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