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The Australian share market closed sharply in the red for the 12th consecutive day, as bourses across the Asia Pacific region slumped on fears of a US recession.
The decline marks the biggest one-day fall in the benchmark index since 1997, and was part of a global rout in equity markets.
Brokers said panic selling was the order of the day, but they still expect the market to stabilise in the near term.
"We've seen our market come back to levels that I think are too low ... and fear of a recession in the US is more than reflected in share prices globally," Ausbil Dexia head of equities Paul Xiradis said.
"There appears to be a lot of forced selling in the marketplace."
The benchmark S&P/ASX200 index plummeted 393.6 points, or 7.05 per cent, to 5186.8 points.
It was the biggest one-day loss since October 28, 1997 when it shed 6.79 per cent.
But the broader All Ordinaries index was slashed by 408.9 points, or 7.26 per cent, to 5,222 points.
The decline was the largest since October 29, 1987, when the index fell 7.52 per cent.
On the Sydney Futures Exchange at 1613 AEDT, the March share price index futures contract was down 406 points, or 7.26 per cent, to 5,190 on 57,058 contracts.
The weaker session also marks the local market's longest losing streak since January 1982.
With US markets closed overnight for a public holiday, investors were led by Europe, where all the major bourses fell and UK stocks suffered the biggest one-day loss since the September 11, 2001 terrorist attacks in the US.
In Asia today, regional stock fared badly, with Hong Kong's Hang Seng index off 8.04 per cent, Japan's Nikkei index down 5.43 per cent and China's Shanghai index down 5.67 per cent.
However, Federal Treasurer Wayne Swan says Australia is well placed to ride out the shake-up on global financial markets.
"I note we are well placed to ride out the turbulence that flows from events in the United States even though we are not immune from it," he said.
"The prospects for ongoing growth in Asia and the developing markets are assisting us to withstand the fallout occurring elsewhere."
Mr Xiradis said the local market should stabilise in the next few days, with "some sort of bounce back in the not too distant future".
"We've seen some international selling over the past few days and also some leveraged selling where a lot of people are stopped out of their leveraged plays and being forced to sell.
"That's amplifying the extent of the move.
"What's driving it now is fear and forced selling ... not sustainable fundamental factors."
He said stocks had not been this low for many years, representing compelling value.
Ord Minnett head of research Simon Kent-Jones said the market had opened in a panic, which got worse as the day progressed.
"It certainly seems like an overreaction but I don't know what the circuit breaker will be," Mr Kent-Jones said.
"There's a fair few margin calls coming through.
"I imagine there is a fair bit of offshore selling ... which is why some of the large-cap stocks are getting hit.
"I imagine we'll see some negative numbers coming through from the US overnight."
James Packer's Consolidated Media Holdings was one of the few stocks spared from the selldown.
Its shares closed 37 cents, or 9.59 per cent, higher to A$4.23, after the company received a A$3.31 billion joint-venture takeover offer from Mr Packer and Lachlan Murdoch yesterday to take the company private.
Elsewhere in the media sector, Fairfax had shed 23 cents, or 5.49 per cent, to A$3.96, News Corp had lost A$1.16, or 5.33 per cent, to A$20.60 and its non-voting scrip was down A$1.12, or 5.27 per cent, to A$20.13.
The big miners suffered, with takeover target Rio Tinto down A$13.25, or 11.6 per cent, to A$101.00 and rival BHP Billiton had fallen A$2.29, or 6.88 per cent, to A$31.00.
Among the banks, Commonwealth Bank was down A$1.93, or 3.8 per cent, to A$48.85, National Australia Bank had fallen A$2.30, or 6.53 per cent, to A$32.90, Westpac was down A$1.27, or 4.93 per cent, to A$24.50 and ANZ was down A$1.85, or 7.06 per cent, to A$24.35.
The retail sector was also a sea of red. Wesfarmers was off A$2.00, or 5.8 per cent, at A$32.50, Woolworths was down A$1.90, or 6.12 per cent, to A$29.13 and David Jones had fallen 45 cents, or 9.47 per cent, to A$4.30.
Harvey Norman shares were down 52 cents, or 8.84 per cent, to A$5.36, despite news today that its sales had risen 12.4 per cent to A$3.04 billion in its first half.
Energy stocks followed the downward trend, with Woodside Petroleum off A$4.53, or 9.96 per cent, to A$40.97, Oil Search was down 77 cents, or 17.15 per cent, to A$3.72 and Santos had shed 87 cents, or 6.89 per cent, to A$11.75.
Spot gold was trading at US$857 per fine ounce, down US$23.50 on yesterday's Sydney close of A$880.50 per fine ounce.
Gold producer Newcrest Mining was down A$3.36, or 9.57 per cent, to A$31.74, Newmont Mining had fallen 31 cents, or 5.24 per cent, to A$5.61 and Lihir Gold was off 47 cents, or 13.54 per cent, to A$3.00.
Flinders Diamonds was the most traded stock, with a total of 116.8 million shares changing hands worth A$9.98 million. Its shares fell 3.4 cents, or 30.91 per cent, to 7.6 cents.
Preliminary data showed a total of 3.15 billion shares were traded today worth A$9.58 billion, with 78 stocks up, 1,607 down and 144 unchanged.
- AAP
