Hong Kong shares plunged 7.2 per cent early on Thursday, scaling back most of

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the gains made in a rally earlier this week, as deepening worries over a protracted global recession triggered another flight to cash.

The tone for a hefty correction was set by Wall Street's worst day since the stock market crash of 1987. Other major Asian markets joined the rout, with Japan's Nikkei average .N225 sliding 9.6 percent and South Korea's Kospi dropping 6.3 percent.

By 0256 GMT, the benchmark Hang Seng Index .HSI had fallen 1146.72 points to 14,851.58, giving back most of the gains made in its two-day 14 percent rally on Monday and Tuesday.

Only 29 of the total 1088 traded issues were trading higher in Thursday early trade.

"We are seeing some initial support emerging in most Asian markets. The falls this morning have not been as bad as Wall Street," said Alex Wong, director with Ample Finance Group.

"We already tested extreme lows last week and investors seem to have a better idea of where the bottom lies so the liquidation sales are not that urgent today."

The China Enterprises Index .HSCE of top locally listed mainland Chinese companies had fallen 8.6 percent to 7,215.43, led by a 10 percent decline in No.2 lender China Construction Bank.

Air China plunged 12.5 percent after the nation's largest aviation group by market value said on Wednesday it expected to record a loss for the first nine months on shrinking demand and a significant slowdown in revenue growth.

The loss was caused mainly by high fuel costs and the adverse impact from the Sichuan earthquake, market fluctuations during the Beijing Olympic Games and the global financial crisis, it said in a statement.