(CNN) -- Asian markets on Thursday followed the slump of major U.S. stocks, as an emergency loan to one of the world's biggest insurers stoked fears about the health of financial markets.
Hong Kong's Hang Seng plunged 7.2 percent, Japan's Nikkei fell 3.7 percent, and markets in Australia and South Korea were also down.
Thursday's news spread across the Asia-Pacific region and was sobering:
In Hong Kong, China lender Industrial & Commercial Bank of China Ltd, or ICBC, fell more than 5 percent.
In Japan, that country's three megabanks suffered substantial losses on the markets. Mizuho Financial Group, Inc. sank 7.2 percent, Mitsubishi UFJ Financial Group, Inc. shed 4.6 percent, and Sumitomo Mitsui Financial Group retreated 7.4 percent, The Associated Press reported.
In Australia, Macquarie Group Ltd., that country's biggest investment bank and securities firm, took an 18 percent nosedive, AP reported.
"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?" said Richard Herring, the director of trading at Burrell Stockbroking told the AP.
The Asian markets followed drops on Wall Street. On Wednesday, the Dow Jones industrials tumbled 449 points -- its second-worst day of the year, but only the second worst day this week. The Nasdaq and the S&P also suffered drops of more than 4 percent.
The selloff came in the wake of investment bank Lehman Brothers' bankruptcy, Merrill Lynch's sale to Bank of America, and the U.S. government announcing an $85 billion plan to bail out insurance giant American International Group (AIG).
The fallout from the housing and credit market collapse "ripples through the entire financial industry and is stretching to other industries," Kelli Hill, Portfolio Manager at Ashfield Capital Partners told CNNMoney. "The question everyone is asking is 'what's going to fix this?'"
The remaining two Wall Street investment banks were hit particularly hard with Morgan Stanley down 29 percent and Goldman Sachs down 21 percent.
John Schloegel, vice president of investment strategies at Capital Cities Asset Management in Texas told Reuters.com: "Every investor is now questioning each and every investment they have anywhere on the planet.
"It's leading them to sell anything that has any type of risk -- to sell first. It's an unusual situation we are in right now." Watch policy-holders mob an AIG office »
British bank Barclays said it had reached a deal Wednesday to purchase key units of U.S. investment bank Lehman Brothers for $1.75 billion, as turbulent global markets continued to worry investors.
The deal came just two days after Barclays walked away from talks to buy the beleaguered financial institution in its entirety.
Barclays will acquire Lehman's North American investment banking and capital markets businesses for $250 million in cash.
Barclays will also purchase Lehman's New York headquarters and two data centers in New Jersey at their current market value estimated at $1.5 billion, a company statement said. Watch more about the Barclays deal »
Lehman Brother Holdings -- mired in bad mortgage-related investments -- failed to secure a government loan or buyout deals with Barclays and Bank of America over the weekend and subsequently filed for Chapter 11 bankruptcy protection on Monday.
The deal must still be approved by the bankruptcy court.
Approximately 10,000 Lehman employees work for the fixed income and equity sales, trading and research and investment banking businesses that Barclays is set to acquire, Barclays said.
The British bank looks forward to "working together to deliver the combination's full potential." its statement said. A possible signal the jobs could be saved from the chopping block.
New York Mayor Michael Bloomberg said that Lehman's CEO Dick Fuld told him Barclays had agreed to buy the key Lehman units intact and added that the bulk of Lehman's New York City-based employees will be retained. Watch more about the troubled times on Wall Street »
The collapse of the fourth largest investment bank in the U.S. contributed to the worst day on Wall Street for seven years Monday, which in turn hit stocks across Asia and Europe.
CNN's Miguel Susana contributed to this story.
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