(AP)
Updated: 2007-02-28 13:57

TOKYO - Stock markets plunged across much of Asia for a second day Wednesday amid jitters about a sell-off in China's stock market and worries about a possible slowdown in the Chinese and U.S. economies.

Shares in Tokyo, Hong Kong, Singapore, Malaysia, Australia, New Zealand, the Philippines and Indonesia all tumbled more than 3 percent in morning trading, following dismal overnight losses on Wall Street, the worst since the Sept. 11, 2001, terrorist attacks.

In China, stock modestly recovered from their 9 percent plunge Tuesday — their biggest drop in a decade. The Shanghai Composite Index was up 1.2 percent to 2,804.28.

But investors in other Asian markets dumped shares Wednesday, with Japan's Nikkei 225 stock index down 644.85 points, or 3.56 percent, to 17,475.07 points at the close of the morning session.

Hong Kong's Hang Seng Index was down 3.8 percent, while Australia's benchmark S&P/ASX200 index shed 3.5 percent. Indonesian shares lost 5.2 percent, while Philippine stocks plunged 9.4 percent.

The trouble began Tuesday — just one day after Chinese stocks hit a record — as investors unloaded shares to lock in profits amid speculation about a fresh round of austerity measures from Beijing to slow the nation's sizzling economy.

The Shanghai Composite Index tumbled 8.8 percent, its largest decline since Feb. 18, 1997. In New York, the Dow Jones Industrial Average slid 416 points, or 3.3 percent, to 12,216.24. Main European indexes fell about 3 percent.

Investors were also spooked by comments Monday from former U.S. Federal Reserve Chairman Alan Greenspan, who said a recession in the U.S. was "possible" later this year.

On Wednesday, Australian Treasurer Peter Costello predicted the plunge in China's share market would trigger "volatility on equity markets for some time."

But his overall assessment of China's economy was positive, telling reporters the Asian giant would continue to grow, albeit "in fits and starts."

Japan's Chief Cabinet Secretary Yasuhisa Shiozaki tried to quell concerns about the Tokyo market saying the overall fundamentals in Japan were still strong.

"On a broad perspective the corporate sector continues to perform well," Shiozaki said. "A long-term economic recovery is continuing."

Some regional brokers said they saw an element of panic selling among retail investors but that more experienced investors were sitting it out. Other market players were on the look out for bargain hunters to emerge later in the session.

Australian brokers said they were confident the fall was a correction, not the start of a bear market.

"I'd put a number of say 3-5 percent on it today," said AMP chief economist Shane Oliver, adding that the drops could extend to 10 percent in the next few weeks. "I don't see it having major economic implications and therefore I'm pretty confident it's just a correction."