HONG KONG (AP) - Asian markets fell sharply Thursday as troubles at U.S. investment bank Lehman Brothers fanned fears of more credit-market losses and drove down financial company shares across the region.

Japan's key stock index sank to its lowest in nearly six months as investors dumped banks and brokerages. The Nikkei 225 closed down 1.98 percent. to 12,102.50 - its lowest close since March 18.

In China, the Shanghai Composite Index fell 3.3 percent on heavy selling in financials and property stocks. Both Hong Kong and Taiwan's key stock measures lost more than 3 percent.

Many investors were jittery after Lehman Brothers Holdings Inc. reported an almost $4 billion third-quarter loss and detailed a turnaround plan. The No. 4 Wall Street investment bank said it would sell a majority stake in its prized investment management business, spin off a troubled mortgage unit and slash its dividend.

The news helped send all major Asian benchmarks lower, wiping out gains from a regional rally earlier this week on a U.S. government move to seize mortgage lenders Fannie Mae and Freddi Mac.

``It's pretty severe out there,'' said Peter Lai, investment manager at DBS Vickers in Hong Kong. ``People are losing quite a lot today.''

Volatile markets, pessimism about the financial sector and prospects for a sustained global slowdown are leading investors to move funds from stocks to safer waters such as cash or bonds, said Nobuhiko Kuramochi, general manager of the equity information department at Shinko Securities in Tokyo.

``Right now, there's little incentive for investors to move back into stocks,'' he said.

In Japan, Mitsubishi UFJ Financial Group, Inc., the world's largest bank by assets, shed 5.07 and top Japanese brokerage Nomura Holdings, Inc. tumbled 5.94 percent.

In China, leading insurance company China Life sank 8 percent while Shanghai Pudong Development Bank, a mid-sized lender, fell 7.7 percent.

Leading China lender ICBC lost 3.4 percent in Hong Kong.

In currencies, the dollar fell to 107.15 yen from 107.38 yen late Wednesday. The euro stood at $1.3940 from $1.3962.

AP writer Tomoko A. Hosaka contributed to this report.

09/11/08 05:38 © Copyright The Associated Press. All rights reserved. The information contained In this news report may not be published, broadcast or otherwise distributed without the prior written authority of The Associated Press.