South Korea's Kospi index saw the region's biggest decline at 4.06 per cent while stock indices in mainland China and Taiwan drooped more than 3 per cent.

A stronger yen, which reduces exporters' overseas earnings, also turned investors in Tokyo bearish as the benchmark Nikkei 225 Stock Average was down 1.83 per cent at 12,834.18 while the broader Topix index of all first-section issues also fell 1.96 per cent to 1,230.64.

A slowdown in US consumer spending in July raised fears of lower demand for products made in Japan, whose largest export market is the United States, as well as in the other production powerhouses of Asia.

In China, stocks tracked losses in other Asian markets, but domestic events also played a role.

Analysts blamed the mainland slump on the lack of expected government measures to boost China's stock markets, concerns about the lack of profitability of some listed companies and the impact of a new earthquake in the south-western province of Sichuan over the weekend, the Shanghai Daily newspaper said.

The key Shanghai Composite Index, which tracks shares traded in local and foreign currencies, fell 3.01 per cent to 2,325.14.

State-run steel, aluminum, auto and aviation firms were among the biggest losers in Shanghai.

With Monday's fall, the Shanghai index has lost more than 55 per cent of its value this year, but analysts had forecast a slump and warned for months that Chinese shares were heavily inflated.

The smaller Shenzhen Component Index also plunged 3.29 per cent to 673.51 while the CSI 300 Index, which tracks yuan-denominated A shares listed on the mainland's two exchanges, dived 3.45 per cent to 2,309.17.

Besides concerns about the US economy, heavy selling in the technology sector - triggered by worse-than-expected quarterly profits released by Taiwan's top electronics maker, Hon Hai Precision Industry Co - also sent stocks in Taipei down 3.3 per cent, dealers said.

The weighted price index of Taiwan Stock Exchange plummeted 3.3 per cent to 6,813.09.

In South Korea, the Kospi fell to 1,414.43 as the won dropped to a four-year low against the US dollar. A weaker won raises the cost of dollar-denominated corporate debts and fuel expenses.

Both the lower won and higher fuel prices dealt Korean Air Lines Co the biggest drop in its stock in six years.

Other major indices around the region also fell: Hong Kong's Hang Seng by 1.67 per cent, Singapore's Straits Times Index by 0.95 per cent and Australia's S&P/ASX 200 Index by 0.34 per cent.

The Stock Exchange of Thailand Index fell 1.35 per cent in a country that is seeing anti-government demonstrations while India's two major stock indices slumped by about
1 per cent by early afternoon trading.

Most other indices also dropped. Malaysia's and Vietnam's were closed for holidays, and the US stock market is also to be closed Monday. (dpa)