HONG KONG (AFP) - Asian stock markets plunged Tuesday after the collapse of Lehman Brothers caused a meltdown on Wall Street, with governments holding emergency meetings to stave off a wider financial crisis.

Hong Kong opened off 6.5 percent and Tokyo was down more than 5.0 percent, as trading screens across the region went red on the heels of the biggest one-day point loss on the US markets since the September 11 terror attacks.

Officials appealed for calm, trying to avert a public panic and urging investors not to over-react to the plunge, which comes after months of market turmoil set off by US subprime, or high-risk, housing loans.

"We're in the middle of a crisis," said YK Chan of Phillip Asset Management in Hong Kong.

US Treasury Secretary Henry Paulson vowed Monday to ensure "stability and orderliness" at home and overseas, but markets across Asia found no solace after news that two Japanese banks were among Lehman's biggest lenders.

Aozora, one of those banks, lost almost 18 percent of its share value by mid-day. Meanwhile Lehman's Japanese unit was reported to have liabilities of 32.6 billion dollars (roughly S$46.6 billion) -- the second most of any bankruptcy filing in post-war Japan.

Government officials held an emergency meeting with Bank of Japan (BoJ) governor Masaaki Shirakawa. The BoJ injected 1.5 trillion yen (14.4 billion dollars) into money markets to try to calm the turmoil.

But there were fears the chaos would continue to have a broad impact across Asia, not least in Japan, the world's second-largest economy after the United States.

The turmoil "will inevitably curb US demand for Japanese export products down the road and this will affect the overall Japanese economy," said Kaoru Yosano, the minister for economic and fiscal policy.

In South Korea, share prices were down 5.4 percent in early trade and the currency, the won, was down three percent against the dollar. The central bank said it would intervene on the foreign exchange market if necessary.

"The reaction to the US (turmoil) looks excessive, and such an excessive reaction can trigger a rapid correction," said Choi Jong-Ku, director general of the finance ministry's international finance bureau.

South Korean economic and financial chiefs met to consider their next move, with some looking for a silver lining amid the slew of negative news.

Vice Finance Minister Kim Dong-Soo told reporters before the meeting that Lehman's collapse could be positive for global markets by "quickly removing market instability."

His remarks echoed Paulson, who on Monday insisted that "market discipline" -- in other words, letting failing institutions fail -- needed to be part of the US response to the crisis.

"Our banking system is a safe and a sound one," Paulson said.

But earlier this month he ordered the US government's takeover of US mortgage giants Freddie Mac and Fannie Mae, and on Monday he reiterated that the US housing mess was "the root" of the current troubles.

The blue-chip Dow Jones Industrial Average dropped 4.4 percent on Monday, its largest one-day point loss since the re-opening after the September 11 attacks in 2001.

American International Group (AIG), one of the world's biggest insurance companies, slid 60.8 percent -- and could now be facing the end after three major credit agencies lowered their ratings for the firm.

Meanwhile Merrill Lynch got a lifeline with a 50 billion-dollar takeover deal from Bank of America in a move that appeared to ease some worries. But shares in Bank of America fell 21 percent.

European markets were also sharply affected on Monday. London's FTSE 100 index slumped 3.9 percent, the CAC 40 in Paris lost 3.8 percent and in Frankfurt the DAX shed 2.7 percent.

The Hong Kong government said it would ensure orderly market trading as shares tumbled sharply. At least six blue-chip stocks were down more than 10 percent by mid-morning.

Markets across the region were hit hard. Sydney was down 2.6 percent, Jakarta opened down 6.5 percent, Shanghai was off 4.1 percent, and Singapore was off 2.3 percent.

Manila plunged 4.3 percent at the opening bell. Taipei shares were off 3.9 percent.