It was Asia's second day of losses and followed a rout in European markets on Thursday. Investors across the global equity markets cut back their riskier bets on equities and commodities after Dubai World, the emirate's main development engine, announced it was asking creditors to delay paying back its $60 billion debt.

The news triggered fears of a massive default and a wave of heavy losses at banks and companies exposed to its debt that could cause more financial pain just as the global economy is starting to recover.

Also, dampening the mood was the slumping dollar, which weakened to a new 14-year low below 85 yen, dragging down shares of Japanese exporters.

Earlier in Asia, Japan's Nikkei 225 stock average fell 301.72 points, or 3.2 per cent, to 9,081.52. Hong Kong's main index dived 1,075.91, or 4.8 per cent, to 21,134.50.

Elsewhere, South Korea's Kospi benchmark plummeted 4.7 per cent to 1,524.50. Certain banks got hit especially hard amid jitters about any losses they might suffer from their exposure to Dubai World. In Hong Kong trade, HSBC tanked 6.1 per cent and Standard Chartered fell 5.8 percent; both British-based banks have substantial Middle East operations.