HONG KONG - Asian markets tumbled Monday as a heavy loss on Wall Street at the end of last week was compounded by the bankruptcy of US bank CIT at the weekend, hitting confidence for a global economic recovery.

Tokyo lost 2.31 percent, Sydney 2.21 percent and Seoul 1.37 percent as dealers went into selloff mode. Hong Kong lost 0.61 percent, after having been almost three percent lower at one point.

Wall Street had plummeted 2.51 percent on Friday as confidence whipped up by the gross domestic product data was wiped out by worries that CIT Group, one of the largest small-business lenders in the United States, was in trouble.

Those fears were realised on Sunday when the bank filed for Chapter 11 bankruptcy with its board approving a "prepackaged" restructuring plan to shed 10 billion US dollars in debt.

The 101-year-old firm had struggled to stay afloat in the wake of the sub-prime mortgage debacle despite being rescued by a government bailout in July and receiving an emergency loan as recently as October 28.

The news jangled market nerves about the fragile global economic outlook in the wake of the international financial crisis.

"CIT's bankruptcy is a stark reminder that a full-blown economic recovery is still a long way off," said ETX Capital trader Manoj Ladwa.

"The commercial lending market just got tougher as small businesses will struggle to source funds."

In its filing to the US Bankruptcy Court in Manhattan, CIT reported total assets of 71 billion US dollars and liabilities of nearly 65 billion US dollars, making it the fifth largest bankruptcy in US history.

It said it aims to emerge from court protection by the end of the year.

Dealers were also moved to take profits after the big gains on Friday, which capped a week of losses after the US announced its economy had grown a better-than-expected 3.5 percent in the third quarter.

However, many analysts pointed out that the big rise was helped by the government's enormous stimulus measures including the highly successful "cash for clunkers" programme to boost the ailing car industry.

Markets were also nervous ahead of monetary policy decisions due this week in the United States, the eurozone, Britain and Australia, as well as key US jobs data on Friday.

However, Chinese investors were upbeat after two indexes pointed to rising manufacturing activity in the Asian giant. Shanghai added 2.70 percent.

On the new Nasdaq-style ChiNext board, which debuted with a wild opening on Friday, 20 of the 28 firms ended limit-down 10 percent due to profit-taking after enormous gains on the first day.

Elsewhere, Singapore stocks ended down 0.22 percent. The Straits Times Index eased 5.70 points to 2,645.43.

In Bangkok, shares were down 1.17 percent. The Stock Exchange of Thailand lost 8.02 points to close at 677.22. In Malaysia, the Kuala Lumpur Composite Index lost 1.47 point to 1,241.76. In Indonesia, the Jakarta Composite Index gained 0.17 percent or 3.94 points to 2,371.64.

Despite the losses, market-watchers said financial markets could handle the bad news.

"People are disappointed (with the) slower-than-expected recovery of the US economy. But there's no doubt that the economy is on a recovery track, which will likely prevent a sharper decline," said Jung Seung-jae at Mirae Asset Securities in South Korea.

- AFP/ir