Tokyo - Rising oil prices and overnight falls on Wall Street sent stocks in Asia down Thursday with shares in China seeing the biggest tumbles.

Shares on China's main stock market lost 6.5 per cent, one day after a 5-per-cent rebound had ended a 10-day slump.

The key Shanghai Composite Index, which tracks shares traded in foreign and Chinese currency, closed at 2,748.87.

The smaller Shenzhen Component Index also plunged 7.49 per cent with shares in banks, petrochemical firms and airlines all falling heavily.

The Shanghai Daily newspaper attributed Thursday's fall to remarks made by central bank Governor Zhou Xiaochuan in the United States on Wednesday, when he said tackling inflation remained the priority of China's economic policy.

Zhou's remarks "renewed investors' concerns that the government will step up measures to curb rising prices," while investors were apparently also less optimistic that the government might intervene to bolster the stock markets, the newspaper said.

The big drop on Thursday continued a period of strong daily fluctuations amid an overall downward trend in China's inflated share prices with analysts expecting recent volatility to continue.

Losses in the mainland China stocks added to pessimism in Hong Kong, whose Hang Seng Index fell below 23,000, slumping 2.26 per cent to 22,797.61.

Falls on Wall Street were the main factor driving down stocks in Tokyo, where investors worried about further fallout from the credit crisis after a US financial analyst warned of more related writedowns. The United States is Japan's biggest export market.

The Nikkei 225 Stock Average fell 2.23 per cent to 14,130.17, and the broader Topix index of all first-section issues was down 2.41 per cent at 1,375.6.

In Taiwan, the Taiex was down 2.07 per cent, South Korea's Kospi fell 1.88 per cent and Australia's ASX 200 Index slumped 1.41 per cent.

In South-East Asia, Thailand saw the biggest declines at 3 per cent with political instability adding to worries about oil prices and inflation, brokers said.

The Stock Exchange of Thailand index ended at 742.46, its lowest close in 11 months.

Political tensions were expected to peak Friday when anti-government protestors plan to march on Govenment House to demand the resignations of Thai Prime Minister Samak Sundaravej and his five-month-old cabinet.

The protests have been sparked by a growing perception that the government has mismanaged the economy, which recorded 7.6 per cent inflation last month, while spending too much time of political issues such as manoeuvring for the return to power of Thaksin Shinwatara, a billionaire populist former prime minister who was ousted in a coup on September 19, 2006.

In other South-East Asian countries, Singpore's Straits Times Index fell 1.56 per cent, the Ho Chi Minh Stock Index drooped 2.3 per cent, the Kuala Lumpur Composite Index dropped 1.34 per cent and the Philippine Stock Exchange's 30-share composite index was down 1.35 per cent.

Indonesia bucked the regional trend with the Jakarta Composite Index up 0.36 per cent.

In South Asia, Pakistan's stock market plunged as fears of an armed conflict with Afghanistan were causing foreign investors to pull out their money, traders said.

The benchmark KSE-100 Index was off 3.18 per cent at 11,870.95.

"The new threat by Afghanistan's President Hamid Karzai of sending troops to Pakistan is creating a massive selling pressure from foreign institutional investors," trader Ateeq Ahmad of Capital One Equities said, referring to Karzai's threat Sunday to pursue Taliban militants over the border.

In India, the Bombay Stock Exchange's 30-share Sensex fell 2.17 per cent while the broader 50-share Nifty of the National Stock Exchange was down 1.71 per cent. (dpa)