HONG KONG - Asian stocks slumped Tuesday following the collapse of US investment bank Lehman Brothers, while governments tried make reassurances that their economies were sound.

Japanese shares dropped almost five percent to close at a three-year low, while Hong Kong was off 5.4 percent and Seoul lost more than six percent.

Officials in Australia, Japan and elsewhere pledged to try to keep markets calm, with Tokyo injecting 2.5 trillion yen (24 billion dollars) into the markets.

Ratings agencies downgraded American International Group (AIG) ? a move that could spell the end for the insurance giant and Bank of America shares dropped 21 percent after it bought distressed Lehman rival Merrill Lynch.

In Australia, where a surprise late rally kept the market's losses to 1.4 percent, Prime Minister Kevin Rudd met treasury officials and the head of the Reserve Bank of Australia.

Markets found no solace after news that two Japanese banks were among Lehman's biggest lenders, one of which, Aozora, lost around 20 percent of its share value.

In South Korea, shares closed 6.1 percent lower while the currency, the won, fell 4.3 percent against the dollar, its biggest daily drop in a decade.

And financials plummeted almost seven percent in Taiwan amid concerns of an estimated exposure of 80 billion Taiwan dollars (2.48 billion US) to Lehman for local investors. Taipei closed 4.89 percent down.

Chinese share prices closed 4.47 percent lower, a day after the government cut interest rates in a bid to boost economic growth.

Singapore bounced back from an opening of 2.31 percent down to end the day just 1.01 percent off.

Elsewhere Philippine share prices closed down 4.5 percent, the sharpest one-day fall in Manila since January, while in Wellington the market shed 2.87 percent. Malaysian stocks closed 1.9 percent down and the Thai market ended 2.78 percent lower.

However, Jakarta's bourse finished the day one percent higher after opening almost seven percent down.

TOKYO: Japanese share prices plunged nearly five percent, dealers said.

Banking shares were flooded with sell orders on news that two Japanese financial institutions were top lenders to Lehman Brothers.

The Tokyo Stock Exchange's benchmark Nikkei-225 index fell 605.04 points or 4.95 percent to 11,609.72, its lowest close since July 8, 2005.

The broader Topix index of all first-section shares plunged 59.63 points or 5.07 percent to 1,117.57.

Traders dumped stocks and ran for cover under the safety of government bonds, sending yields plummeting as expectations mounted that the US Federal Reserve will slash interest rates later in the day.

Mizuho Financial Group slipped 10.68 percent to 418,000 yen. Aozora Bank, one of Lehman's main Japanese creditors, tumbled 16 percent to 171 yen.

Analysts said the next Wall Street session was unlikely to ease concerns over US financial firms as worries mount over US insurance giant American International Group (AIG).

HONG KONG: Share prices closed down 5.4 percent, dealers said.

The benchmark Hang Seng Index plunged 1,052.29 points to 18,300.61, its lowest closing level since October 2006. Turnover was 88.42 billion Hong Kong dollars (11.34 billion US).

All blue chips were down. The biggest decliner was telecom company China Unicom, which dropped 11.32 percent. State-owned energy and mining firm China Shenhua was off 11.12 percent on concerns that the slowdown in China's economy may hurt the coal demand.

Industrial & Commercial Bank of China slumped 7.3 percent, China Constructions Bank dropped 8.2 percent, and Bank of China fell 8.4 percent.

Analysts said Hong Kong shares will continue to be under pressure in the near term.

Phillip Capital Management strategist Y.K. Chan said 18,000 is the key support for the index in the near term.

Chan said China's surprise rate cut late Monday should be positive as it marks the end of credit tightening and the start of an easing cycle on the mainland.

SYDNEY: Australian shares closed down 1.4 percent, dealers said.

The benchmark SP/ASX200 closed down 66.9 points at 4750.8, while the broader All Ordinaries dropped 75.2 points to end the day at 4799.8.

A total of 1.78 billion shares worth 7.02 billion dollars (5.7 billion US) was traded, with 233 stocks up, 944 down and 243 unchanged.

"It's not quite as bad as people expected, but if you look at it over two days it's pretty large money," said CMC Markets senior dealer James Foulsham.

Commonwealth Bank lost 28 cents to 41.70, while ANZ dropped 51 cents to 16.36. Westpac added 11 cents to 23.26 while its takeover target St George Bank shed 24 cents to 30.10.

Mining giant BHP Billiton gained 35 cents to 36.40 and Rio Tinto was up 42 cents to 106.85.

SHANGHAI: Chinese share prices closed 4.47 percent, dealers said.

They said the growing distress in global financial markets and clear signs about the slowing domestic economy triggered heavy selling in banks and insurers, pushing the key index to a 21-month low.

A surprise interest rate cut Monday was initially seen as positive for the market but soon weighed on the banking sector.

The central bank said late Monday it will cut its one-year benchmark lending rate by 27 basis points to 7.20 percent starting Tuesday, marking the first policy relaxation in more than six years, while keeping the deposit rate stable.

It also said it will lower the reserve requirement ratio for smaller financial institutions starting September 25.

The benchmark Shanghai Composite Index, which covers both A and B shares, was down 93.04 points at 1,986.64 on turnover of 33.8 billion yuan (4.9 billion dollars), off a low of 1,974.39.

The Shanghai A-share index fell 97.36 points, or 4.46 percent, to 2,085.67 points on turnover of 33.7 billion yuan, while the Shenzhen A-share index lost 7.89 points, or 1.30 percent, to 598.74 on turnover of 13.5 billion yuan.

TAIPEI: Taiwan shares close down 4.89 percent, dealers said.

The weighted index fell 295.86 points to 5,756.59, after moving in the range of 5,724.52 and 5,851.90, on turnover of 82.44 billion Taiwan dollars (3.94 billion US).

Decliners outnumbered gainers 1,734 to 171, while 262 stocks were unchanged.

The financial sector dived nearly seven percent, amid concerns of an estimated exposure of 80 billion Taiwan dollars to Lehman for local investors.

The central bank here also assured that local banks have ample funds and no liquidity risks, with 2.06 trillion Taiwan dollars of deposits with the bank.

But analysts remained pessimistic about the market outlook.

Fubon Financial Holdings and Hua Han Financials Holdings were both limit-down nearly 7 percent to 24.20 and 20.55, respectively.

Taiwan Semiconductor Manufacturing Co. was 1.35 percent lower at 51.00 and United Microelectronics Corp. lost 4.72 percent to 10.10.

SEOUL: South Korean shares closed 6.1 percent lower, dealers said.

The KOSPI index lost 90.17 points to end at 1,387.75, the lowest close since March 2007. Volume was 387.2 million shares worth 6.28 trillion won (5.4 billion dollars). Losers outpaced gainers 810 to 63.

The South Korean won ended at 1,160.0 to the US unit compared to Friday's 1,109.1. Markets were closed Monday for a public holiday.

With share prices in freefall, bourse operators temporarily suspended program selling orders to prevent further decline.

Analysts said concerns about the exposure of domestic financial companies to Lehman Brothers derivatives weighed on the market, although the extent of that exposure was not seen to be significant.

Kookmin Bank tumbled 7.99 percent to 55,300 won and Mirae Asset Securities fell 14.7 percent to 90,000.

Samsung Securities declined 9.8 percent to 64,400. Samsung Electronics slid 3.3 percent to 525,000.

SINGAPORE: Singapore shares closed 1.01 percent lower, dealers said.

But they said there was further downside risk and investors remained edgy with a close watch on the troubled US financial sector.

The blue-chip Straits Times Index closed down 25.12 points at 2,461.43 on volume of 1.37 billion shares worth 1.64 billion Singapore dollars (1.15 billion US). Decliners outnumbered rising stocks 404 to 184, with 760 issues even.

Banking stocks were down, with DBS falling eight cents to 16.38, United Overseas Bank down 54 cents to 17.10 and Oversea-Chinese Banking Corp dropping four cents to 7.44.

Singapore Airlines tumbled 10 cents to 15.00, Singapore Telecom rose four cents to 3.30 and shipping firm Neptune Orient Lines climbed nine cents to 1.96.

KUALA LUMPUR: Malaysian share prices ended 1.9 percent lower, dealers said.

The Kuala Lumpur Composite Index fell 19.26 points to close at 1,012.37.

Plantation company IOI Corp ended down 4.7 percent at 4.04 ringgit, Tenaga Nasional lost 5.8 at 6.50 ringgit and Malaysia's largest lender Maybank shed 5.7 at 7.40 ringgit.

Ramunia, which added 9.1 percent at 1.56 ringgit and telecommunications company DiGi.com, which was 1.3 percent higher at 23.80 ringgit.

BANGKOK: Thai share prices closed 2.78 percent lower, dealers said.

The Stock Exchange of Thailand (SET) composite index lost 17.83 points to close at 624.56 points.

JAKARTA: Indonesian shares closed one percent higher, dealers said.

The Jakarta Composite Index rose 16.39 points to end at 1,735.64 after tumbling more than seven percent in early trade.

Top gainers included Bank Mandiri, which rose 7.8 percent to 2,425 rupiah and tin miner Timah, which surged eight percent to 1,350.

Coal miner Bumi fell 6.3 percent to 3,275 rupiah.

MANILA: Philippine share prices closed 4.5 percent lower, dealers said.

The composite index lost 114.44 points to 2,421.72.

It was the sharpest one-day fall on the local equities market since January 22. Philippine Long Distance Telephone declined 3.7 percent to 2,500 pesos.