Asian markets ended mixed Thursday, rebounding from early lows that came after another steep loss on Wall Street and amid persistent worry over the likely impact of a U.S. recession.
Hong Kong's Hang Seng Index fell 3.5 percent at 21,108.2, after dropping as much as 4.4 percent in morning trade.
In Shanghai, the recovery was more dramatic: The Shanghai Composite Index closed 1.1 percent higher at 3,804.1 after having plunged 6.5 percent in morning trade to hit its lowest level since last June.
But trading was subdued without the lead of Asia's largest bourse in Tokyo due to a national holiday in Japan. Financial markets were also closed in India, Indonesia, Malaysia, Pakistan and the Philippines.
Investors continue to worry about the world's financial system and the state of the U.S. economy, a vital export market for Asian companies.
"Until the U.S. market becomes stable, the Hong Kong market is not likely to consolidate its upward trend," said Castor Pang, an analyst at Sun Hung Kai Financial.
In the U.S. on Wednesday, talk swirled about whether further write-downs from financial institutions are in the offing after Merrill Lynch & Co. filed a lawsuit against a company involved in a debt transaction with the investment bank.
The Dow Jones industrial average fell 2.36 percent to 12,099.66 - just a day after it surged 3.5 percent.
Investors have seen advances evaporate many times during the course of the credit crisis. After the big rise following the U.S. Federal Reserve's interest rate cut Tuesday, many wanted to preserve their gains and that led to Wednesday's sell-off, analysts said.
In China, financial stocks bounced back after falling early in the day.
Industrial & Commercial Bank of China gained 2.1 percent after slipping 2.8 percent in the morning; China Life Insurance closed 0.2 percent lower after dropping as much as 5 percent.
PetroChina, which accounts for about a quarter of the Shanghai index's value, plunged 6.73 percent in the morning but closed just 2.3 percent lower.
However, analysts were cautious.
"Don't expect too much out of this rebound. Market sentiment is still quite dismal," said Wei Daoke, a senior analyst at Shenyin & Wanguo Securities Research Institute.
The Shanghai benchmark is still down about 28 percent so far this year.
In Australia, the S&P/ASX 200 index fell 3.1 percent, while in New Zealand the NZX-50 dropped 1.2 percent.
Financial stocks in Taiwan led the benchmark there to a 1.9 percent gain. South Korea's composite index in Seoul eked out a gain of 1.16 points after dropping nearly 2 percent in the morning.