Hong Kong stocks dropped 5 percent in the noon session after Beijing said it plans to push through a national security law for the city, adding to tensions with the US and fuelling fears of fresh civil unrest.
The Hang Seng Index sank 5 percent, or 1,204 points, to 23,075, midway into the second session.
"We could have new protests. Local tensions could trigger Sino-US tensions and the latter is much more stressful for market sentiment and macroeconomy," said Kenny Wen of Everbright Sun Hung Kai Co.
The Beijing move triggered a sell off across Asia, but the losses elsewhere were shallower than in Hong Kong.
Tokyo stocks closed lower with the benchmark Nikkei 225 index losing 0.8 percent, to 20,388.
Shanghai fell 0.9 percent, while Seoul and Sydney shed 0.6 percent.
Singapore and Taipei each lost more than 1 percent, while there was also selling in Wellington and Manila.
"The market was expected to trend top heavy. The three US indices all fell and European shares also showed softness," Okasan Online Securities said in a note to clients.
"The Hong Kong risks warrant close monitoring for the immediate term," it said.
"It will likely be only temporary uncertainty. But it may become a reason among speculators to sell," Okasan said.
Looking beyond the immediate term, the rising tension between China and the United States will continue to discourage investors, it said. (AFP)
Last updated: 2020-05-22 HKT 15:10