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Hong Kong shares ended 2.00 percent lower Monday as a plan by Cyprus to tax bank deposits raised fresh concerns over the eurozone debt crisis.
The benchmark Hang Seng Index lost 449.75 points to 22,083.36 -- their lowest since December 4 -- on turnover of HK$78.23 billion ($10.09 billion).
Investors have been spooked by news that Cyprus agreed to a levy of up to 10 percent on bank depositors as part of a deal with fellow eurozone countries and international creditors in order to qualify for a $13 billion bailout.
Deposits of more than 100,000 euros ($129,000) will be hit with a 9.9 percent charge and a 6.75 percent levy will be imposed for anything below that threshold. The proposal must still be passed by parliament.
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.
HSBC fell 2.26 percent to HK$84.15, China Mobile slid 1.88 percent to HK$81.00 and Sino Land dived 3.79 percent to HK$12.68, while China Life Insurance tumbled 3.87 percent to HK$21.10.
However, some mainland property plays enjoyed a rebound from recent losses.
China Resources Land rose 2.2 percent to HK$19.82 after diving 8.1 percent last week, while Sunac China was up 4.4 percent at HK$4.79 after shedding 13 percent in the same time period.
Shanghai shares closed down 1.68 percent. 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 ($13.0 billion).
Sentiment was hit by the government's decision to replace a reform-minded official with a former senior banker as the new securities regulator.
Dealers are concerned about the authority's resolve to revamp a stock market long plagued with allegations of insider trading, fraudulent accounting practices and inadequate information disclosure.
Remarks by new Premier Li Keqiang at the weekend on reducing government expenditure, including spending on "official hospitality", hit liquor stocks.
Tuopai Shede Wine slumped 6.81 percent to 20.81 yuan, while Kweichow Moutai lost 4.25 percent to 169.45 yuan.
Carmakers fell after state television on Friday exposed quality problems of some models while the consumer quality agency on Saturday urged German auto giant Volkswagen (VW) to recall vehicles with a gearbox defect.
SAIC Motor, which was cited by the China Central Television programme, lost 2.59 percent to 14.66 yuan.
Among financials China Construction Bank lost 2.99 percent to 4.55 yuan and Agricultural Bank of China fell 2.44 percent to 2.80 yuan.