Hong Kong stocks fell 0.74 percent Thursday amid growing concerns about the eurozone, while on the mainland banks were hit by fresh moves to tighten up regulations and cut risk.
The benchmark Hang Seng Index lost 165.19 points to 22,299.63 on turnover of HK$73.57 billion ($9.49 billion).
The losses were in line with a regional sell-off ahead of the reopening of banks in Cyprus after almost two weeks, under strict capital controls following the weekend's bailout that included a tax on some savings.
SMBC Nikko Securities general manager of equities Hiroichi Nishi told Dow Jones Newswires that while the main concern was not Cyprus, dealers were worried about "the 'contagion effect' of a possible run on banks spreading to other parts of the eurozone".
In Italy centre-left leader Pier Luigi Bersani struggled to form a coalition after polls in February that saw an anti-austerity party burst on to the political scene, holding the sway of power.
Bersani failed in talks with political parties to form a government after the anti-cuts Five Star Movement rejected his overtures.
China Mobile fell 0.36 percent to HK$82.20, CNOOC slipped 1.19 percent to HK$14.92 and HSBC lost 1.03 percent to HK$83.00, while Ping An insurance was 0.58 percent off at HK$60.20.
Chinese shares tumbled 2.82 percent. The benchmark Shanghai Composite Index lost 2.82 percent, or 64.96 points, to 2,236.30 on turnover of 107.6 billion yuan ($17.3 billion), the lowest close since December 28.
Traders took fright after the China Banking Regulatory Commission (CBRC) Wednesday ordered banks to step up checks on wealth management products as part of a bid to boost risk control and transparency, state media said Thursday.
"The CBRC's new rules will definitely hit banks' earnings," Hongyuan Securities analyst Tang Yonggang told Dow Jones Newswires.
Industrial Bank plunged by its 10 percent daily limit to 17.87 yuan and China Citic Bank dropped 9.11 percent to 4.79 yuan.
Property developers fell ahead of an expected announcement by local governments of measures to control home prices. Gemdale slipped 4.18 percent to 6.42 yuan while Poly Real Estate shed 2.40 percent to 11.77 yuan.
COSCO Shipping ended down 1.68 percent to 4.10 yuan after it said Wednesday that its net profit plunged nearly 90 percent year-on-year in 2012.