(FT) -- Stock markets in Asia suffered sharp falls on Friday as global investors scrambled to understand the implications of Dubai World's restructuring and unexpected debt standstill.

The lack of information about Dubai's flagship government-owned holding company, made worse by a religious holiday in the Middle East, prompted indiscriminate selling of stocks linked to the region. The cost of insuring against default in emerging markets around the world also leapt.

In Japan, the Nikkei 225 lost 3.2 percent to close at 9,081.52, its biggest one-day decline in almost eight months. In Seoul, the Kospi fell 4.7 percent to 1,524.50, a four-month low. Australia's S&P/ASX 200 lost 2.9 percent to 4,572.10, while Hong Kong's Hang Seng dropped 5.1 percent to 21,088.55.

Investors said that the lack of information about the debt standstill, announced on Wednesday, was the key factor sparking the wider market turmoil. Reacting to the news on Thursday, European markets were convulsed, although trading volumes were low because of the Eid holiday and US Thanksgiving.

Investors generally moved into safer assets, pushing up prices of traditional havens such as government bonds.

Dubai: Local moves, global implications

Yields on German 10-year Bunds, the benchmark for Europe, fell 10 basis points to 3.16 percent while equities were battered. The pan-European FTSE Eurotop 300 fell 3.2 percent while in London, the FTSE 100 dropped 3.18 percent, its worst one-day fall in almost eight months.

Financial stocks were the worst-hit sector, dropping 5.3 percent as investors rushed to quantify their exposure to Dubai and the wider region. Barclays shares fell 8 percent to 291.1p.

"In the absence of definitive information it's hard to see the market treating this as an isolated one-off," said one trader.

Has debt freeze exposed Dubai mirage?

After markets in Europe closed Dubai issued a statement defending its move as a "sensible business decision".

Sheikh Ahmed bin Saeed al-Maktoum, chairman of the Supreme Fiscal Committee, said: "While the government understands the concerns of the market and the creditors, it had to intervene because of the need to take decisive action to address its particular debt ­burden."

He said the government had acted in full knowledge of how markets would react. "We want to ensure resources are deployed ... to enhance the businesses of Dubai World Group, build on the restructuring ... and ensure long-term commercial success." He said that further information would be given early next week.

A conference call for bondholders of Nakheel, the Dubai-owned property company at the centre of the storm, collapsed after phone lines were swamped with callers.

Nakheel, wholly owned by Dubai World, is due to redeem a $3.5 billion bond next month. On Thursday, the bonds traded just above 70 cents on the dollar and almost 40 below their 109 redemption price as investors lowered their expectations that payments would be made following Dubai World's call for a six-month standstill.

What is Dubai World?

The conference call was organised by QVT, a New York hedge fund. A fund executive confirmed that it was re-organising the call with a greater phone capacity but declined to comment further.

"People are panicking: This whole process counters everything that the rulers have been saying and the way it has been communicated before the holidays so no one can get any information is confusing," said one hedge fund manager.

The cost of insuring Dubai's debt against default jumped sharply, up $60,000 to $500,000 annually for every $10 million of debt covered for five years.

Other Gulf states and emerging markets with perceived problems were also under pressure. Hungary, which has had problems refinancing debt, and Greece, with one of the highest debt burdens in Europe, saw their insurance costs jump.

© The Financial Times Limited 2009