News of the US investment bank JP Morgan buying rival Bear Stearns for just US$2 a share and the US Federal Reserve making an emergency cut in the discount rate - the interest rate it charges banks for loans - by 0.25-percentage point before the opening of Asian markets only served to deepen unease among traders.

It was chaos in the regional foreign exchange market, as the ailing green-back sank to a 13- year low of 96.98 yen after dropping an eye-popping 3.57 yen, while the euro gained 2.8 US cents to a record high of US$1.5839.

Gold ? a traditional refuge in times of troubles ? rose US$21 to a record high of US$1024 an ounce.

Hong Kong was at the epi-centre of the Asian sell-down with the Hang Seng Index sinking by up to 5 per cent in early trades, before closing 4 per cent down at mid-day.

But in Singapore, the benchmark Straits Times Index managed to pare part of its losses, and closed at mid-day, at only 58.12 points, or 2.05 per cent, down at 2780.86 after losing close to 90 points, after opening bell.

'Hong Kong is suffering a massive collateral fallout from the huge exposure of banks such as HSBC Holdings and Bank of China to the troubled US financial markets ? whether it is directly through mortgages or through sub-prime debts,' said a dealer in Singapore.

The same goes for Japanese financial institutions which had lent heavily to the US markets. This caused Tokyo?s Nikkei-225 Index to tumble 3.3 per cent.

But banks in Singapore are viewed as safe-havens as they have already written off the bulk of their US collateralised debt obligations and derived the bulk of their earnings from the ultra-safe Singapore loans market.

At mid-day on Monday, DBS Group Holdings was down 24 cents at $16.62, after slipping to a low of $16.40, while United Overseas Bank has fallen 14 cents to $17.10, but off its intra-day low of $16.74.

'When systemic risks threaten the global financial system, investors are wary of big financial institutions which may have dealings with counter-parties that may collapse. This is why global banks are so badly-whacked today,' the dealer added.

Experts agreed. In a note this morning, Deutsche Bank Wealth Management?s chief Asian strategist, Marshall Gittler, noted that the US Fed?s loan to Bear Stearns is a reflection that 'it thinks that the financial sytem itself is at risk'.

Many are also anticipating the Fed to cut its key Fed funds rate ? the interest rate which US banks lend to each other - by a massive 1 percentage point to 2 per cent on Tuesday when it meets for its regular rates-fixing meeting.

But given the gravity of the problem, few are anticipating easy fixes to the grave dangers facing global financial system.

'Each measure taken by the Fed has only given temporary relief. Cutting interest rates by 1 percentage point will only point the way to more panic. It may be best to stay out of the market until all this madness is over,' one trader observed.