HONG KONG - Asia stocks tumbled further Thursday, tracking declines Wall Street as investors feared more companies could succumb to the financial crisis that forced the U.S. government to bail out insurer American International Group Inc.
But many of the region's benchmarks recovered from steep early declines in afternoon trade, as the European Central Bank said it was banding together with major central banks around the world to flush more dollars into global markets to ensure liquidity and shore up confidence.
Hong Kong's Hang Seng Index, which sank more than 7 percent at one point, actually turned positive again before closing virtually unchanged, down about 0.03 percent, at 17,632 points. Tokyo's Nikkei 225 index slid 2.2 percent to 11,489.30, a three-year low.
Investors were shaken by the Federal Reserve's $85 billion emergency loan to AIG, the huge U.S. insurer that lost billions in the risky business of insuring against bond defaults and became the latest victim of the historic financial turmoil that's engulfed Wall Street over the last year.
The crisis, a result of problems with souring mortgage debt and restricted credit, has already brought down Wall Street giants Lehman Brothers, Merrill Lynch and Bear Stearns. The two independent investment banks left standing — Morgan Stanley and Goldman Sachs Group — remained under scrutiny.
But some investors were comforted as the European Central Bank announced it was joining the Federal Reserve, the Bank of Canada, the Bank of England, the Bank of Japan and the Swiss National to pump more money into the system. Lloyds TSB PLC's 12.2 billion-pound ($21.85 billion) deal to take over struggling HBOS PLC, Britain's largest mortgage lender, also helped sentiment.
Mitsuru Shimizu, deputy general manager at Cosmo Securities in Tokyo, said efforts by central banks to calm financial market jitters appeared to help restore confidence.
"It looks like the panic-type selling spurred by the financial market turmoil is beginning to calm down," Shimizu said.
Elsewhere, Russia's main stock exchanges were mostly closed Thursday, a day after regulators suspended trading amid a dizzying plummet in share prices. The MICEX resumed limited trading; the RTS is expected to reopen Friday.
In other markets, Australia's S&P/ASX200 index fell 2.4 percent, South Korea's Kospi lost 2.3 percent, India's Sensex lost around 4 percent and China's Shanghai benchmark dropped 2.2 percent.
The losses tracked U.S. markets, where the Dow Jones industrial average fell about 450 points Wednesday, or 4.06 percent, to 10,609.66.
As equities markets staggered, investors fled to gold, seen as a safe haven in times of trouble. Gold for December delivery rose as much as $90.40, or 11.6 percent, to $870.90 an ounce in after-hours trading on the New York Mercantile Exchange after jumping $70 to settle at $850.50 in the regular session.
Oil rose above $97 in Asian trade Thursday, extending its big gains overnight. The dollar was slightly higher at 105.13 yen and the euro rose to $1.4328.
Many banks across the region were hit hard.
Japan's three megabanks fell hard: Mizuho Financial Group, Inc. shed 4.34 percent to 397,000 yen, Mitsubishi UFJ Financial Group, Inc. retreated 3.38 percent to 773 yen, and Sumitomo Mitsui Financial Group, Inc. lost 6.58 percent to 582,000 yen.
Leading China lender Industrial & Commercial Bank of China Ltd, or ICBC, ended 0.3 percent higher after falling over 6.7 percent in Hong Kong.
Macquarie Group Ltd., Australia's largest investment bank and securities firm, took an 23 percent nosedive. The country's No. 2 investment bank, Babcock & Brown, plunged more than 17 percent.
Anxiety among Australian investors over AIG's rescue helped drive the losses, said Richard Herring, the director of trading at Burrell Stockbroking.
"It has actually opened up a whole lot of other questions for investors to answer and that is: AIG is on the rack, what else is potentially out there that could go under?" Herring said.