By Chris Oliver, MarketWatch
HONG KONG (MarketWatch) -- Asian markets skidded lower Thursday, with Hong Kong leading the sell-off as traders rushed to protect profits in large-capitalization shares such as China Mobile, while Japan's Nikkei average fell as export-related shares were hurt by the yen's strength against the dollar.
Markets around the region were spooked by a 360.9-point plunge in the Dow Jones Industrial Average overnight, spurred by a record loss at General Motors Corp. /zigman2/quotes/205226835/composite GM +0.38% , a weaker U.S. dollar and record oil prices.
Markets were also weighing the outlook for the U.S. economy after more U.S. banks announced losses linked to subprime-mortgage securities Wednesday.
Sony Corp. /zigman2/quotes/208567357/composite SNE -0.55% /zigman2/quotes/201361720/delayed JP:6758 +0.67% set a weaker tone for export-related stocks, with its shares retreating 3.1% after the dollar slumped to the to upper 112-yen level.
Shares of PetroChina /zigman2/quotes/205108732/composite PTR -3.18% /zigman2/quotes/204979431/delayed HK:857 -2.52% fell 7.4%, while China's largest offshore oil producer, Cnooc, /zigman2/quotes/204964401/composite CEO -2.12% /zigman2/quotes/203421416/delayed HK:883 -1.74% fell 6.7%.
Traders said the sell-off among the energy blue chips was likely driven by fund managers pulling up stakes and intending to switch into shares of comparable companies in other markets that trade at cheaper valuations.
Hong Kong's Hang Seng Index ended 948 points lower, off 3.2% at 28,760.22, narrowing from a 1,000-plus-point loss earlier in the session.
The China Enterprises Index, a gauge of 43 mainly Chinese state-owned companies listed in Hong Kong, fell 4.5% to 17,716.86.
China's Shanghai Composite Index ended 4.9% lower at 5,330.02.
"A lot of people have got a lot of big profits that they are quite keen to protect, but because China has been such a good run, they'd be loathe to sell just in case they are wrong and the market continues to go shooting back up. ... People are really quite confused." said Andrew Clarke, a trader with Societe Generale in Hong Kong.
China Mobile /zigman2/quotes/200868736/delayed HK:941 -0.37% , the world's largest cellular-service provider by market capitalization, fell 3.8%; it recouped a bit from steeper declines earlier in the session. Industrial & Commercial Bank of China, /zigman2/quotes/201401473/delayed HK:1398 -0.87% , the world's biggest by market value, saw its shares decline 4.1%.
"The party is over," said Alex Tang, head of research for Core Pacific-Yamaichi. "It is very unlikely the market will be able to sustain its upward movement in the short term."
Tang said large institutional funds and experienced traders had turned negative on the market following the weekend news that Beijing's "through train" scheme to enable mainland investors to purchase stocks in Hong Kong is likely to be delayed until 2008.
Australia's S&P/ASX 200 closed down 2.6%, and Taiwan's Weighted Price Index shed 3.5%. China's Shanghai Composite Index was down 3%, while New Zealand's NZX-50 fell 0.5%.
South Korea's Kospi index slid 3.1%, with the downturn coinciding with the Bank of Korea decision to hold benchmark lending rates steady at 5%.
Singapore's Straits Times index was closed for a public holiday.