Hong Kong shares ended 2.00 per cent lower Monday as a plan by Cyprus to tax bank deposits raised fresh concerns the eurozone debt crisis could reignite.
The benchmark Hang Seng Index lost 449.75 points to 22,083.36 on turnover of HK$78.23 billion ($US10.09 billion).
Shanghai shares closed down 1.68 per cent. The benchmark Shanghai Composite Index slumped 38.38 points to 2,240.02 - its lowest close since December 28 - on turnover of 81.5 billion yuan ($US13.0 billion).
Investors have been spooked by news that Cyprus agreed to a levy of up to 10 per cent on bank depositors as part of a deal with fellow eurozone countries and international creditors in order to qualify for a $US13 billion bailout.
Deposits of more than 100,000 euros ($129,000) will be hit with a 9.9 per cent charge and a 6.75 per cent levy will be imposed for anything below that threshold. The proposal must still be passed by parliament.
President Nicos Anastasiades said in a televised address Sunday the tax was the "least painful" option for the recession-hit island and vowed to try to persuade the eurogroup to "limit the impact on small depositors".
While bank customers have voiced dismay and anger at the plan, global markets were jolted amid fears it could reignite the eurozone debt crisis and hit confidence in other troubled countries such as Spain and Italy.
"The feeling is that the euro crisis could be back and that you could see full-on contagion, that's why you're seeing the market reaction today," said Shane Oliver, head of investment strategy and chief economist at Amp Capital in Sydney.
"But I suspect that we are going to hear reassurances from other countries that Cyprus is different and that this plan will not be put in place elsewhere," he told Dow Jones Newswires.