Japan's benchmark Nikkei index plunged almost nine per cent in afternoon trading on Wednesday, hitting the lowest level since October 2003.

India's Sensex index and Hong Kong's blue chip Hang Seng both dived by nearly six per cent.

Trading on the Indonesian stock market was suspended after the main index plummeted more than 10 per cent in mid-morning trade.

And share prices elsewhere in the Asian region were also sharply lower after the US market fell for a fifth straight session overnight.

US stocks slumped more than 500 points to a five-year low at the close of trading on Tuesday as the financial turmoil continued.

The Dow Jones was down 508 points, or 5.1 per cent, despite assurances from George Bush, the US president, that the nation would overcome the crisis.

Bush said on Tuesday the economy would be "just fine" in the long run, and that he was in close contact with European leaders to ensure the market turmoil would not destabilise foreign markets further.

"We have been through tough times before and we're going to come through
this again," he said.

But the country's chief central banker was not as optimistic.

Rate cut signal

Ben Bernanke, the chairman of the US Federal Reserve, said that the economy was likely to remain "subdued" for the rest of this year and into 2009 despite the government's $700bn bailout plan.

"The outlook for economic growth has worsened," he said on Tuesday in Washington DC.

"The heightened financial turmoil that we have experienced of late may well lengthen the period of weak economic performance and further increase the risks to growth."

He also said the risk for inflation had eased with the falling prices for oil and other commodities, giving a strong signal that interest rates might need to be cut.

"In light of these developments, the Federal Reserve will need to consider whether the current stance of policy remains appropriate," he said.

Frantically trying to stop the bleeding on Wall Street, the Federal Reserve also moved to get cash directly to businesses, invoking emergency powers to lend money to companies outside the financial sector and buy up mounds of "commercial paper", the short-term loans that companies use to pay for everyday expenses such as salaries and supplies.

Fears that loans will not be repaid has made it both difficult and expensive for businesses and consumers to borrow money.

Finance ministers from the G7 industrialised nations will be meeting in Washington DC this weekend to tackle the global financial crisis.

Agencies