Glenn Maguire, chief economist for Asia at Societe Generale, said: "What we are seeing is the echo of the fall in the Chinese market and more importantly the fall that we saw in the US equity market overnight."

 

In Sydney share prices plummeted more than three per cent on opening, the biggest single-day fall in six years, before ending the morning down more than two per cent.

 

Indian share prices fell 3.17 per cent in early deals. Stocks fell by more than three per cent in Hong Kong and by over four per cent in Singapore, while Kuala Lumpur and Manila both saw plunges of over eight per cent.

 
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In Japan, the Nikkei dropped 1.52 per cent to 17,826.36 at the start of trade on Wednesday, falling below 18,000 for the first time in nearly a week.
 
South Korea's Kospi index dropped 3.93 per cent, to 1,397.50 in the first 15 minutes of trading.
 
Damage control
 
The Shanghai Securities News said in a front-page report that the government had no plans to levy a tax on capital gains from stocks, citing unnamed spokesmen for the finance ministry.
 
The newspaper, run by the official Xinhua News Agency, is often used for official announcements.
 
The report came a day after Chinese shares took their biggest tumble in a decade, with benchmarks for both the Shanghai and Shenzhen exchanges falling by nearly 9 per cent and triggering losses worldwide.
 
Wall Street had its most dismal trading day since the September 11, 2001 attacks, with the Dow Jones industrial average losing 3.3 per cent to 12,216.24 on Tuesday.
 
Key European exchanges also fell about 3 per cent. The losses continued as markets opened on Wednesday.
 
The exact cause of Tuesday's sell-off in China was unclear. Some analysts blamed profit-taking following recent gains: the market had hit a record high on Monday, with the Shanghai Composite Index closing above 3,000 for the first time.
 
Others pointed to comments by Alan Greenspan, the former Federal Reserve chairman, who warned in comments to a conference in Hong Kong that a recession in the US was "possible" this year.
 
Analysts also have been expecting further Chinese measures such as an interest rate hike, to prevent its economy from overheating.
 

Computer glitch

 

But the explanation for the global wave of selling that has swept global markets computer may be more trivial: a computer glitch.

 

The media company that manages the Dow Jones index of 30 blue chip stocks, said it discovered shortly before 1400 (1900 GMT) that its computers were not properly handling the day's huge volume in trades at the New York Stock Exchange.

 

It switched to a backup computer, and the result was a massive drop in the index as the secondary system took over processing shortly before 1500 (2000 GMT).

 

The Dow plunged about 200 points almost instantly, and was down as much as 546 points - its worst single-session decline in more than five years.