Taiwan stocks closed 3% lower on Monday, leading declines across most of Asia's emerging markets, as curbs to contain new COVID-19 outbreaks fuelled worries that the region's nascent economic recovery will be derailed.
The island's premier looked to reassure investors that the fundamentals of the trade-dependent economy remain strong as new restrictions went into effect over the weekend.
In neighbouring South Korea and Japan, shares closed under 1% lower. The Indonesian stock market, which resumed trade after a break, fell 1.4%.
Pockets of COVID-19 infections in Taiwan and Singapore, both hailed for their success in containing previous outbreaks, and worries over more contagious variants, including the one first detected in India, have sent investors scattering for safer bets such as gold and the US dollar.
"In short, if the (COVID-19) numbers are going up, even if they are still low, you don't have much time to nip this in the bud before you could be dealing with an India-like situation," said Robert Carnell, the Asia-Pacific head of research for ING.
Gold prices climbed to their highest in more than three months, while the dollar also firmed, weighing on the region's risk-sensitive currencies.
A key set of data from China showed factory output growth slowed in April from the jump seen in the previous month while retail sales missed analyst expectations, indicating more pressure on the recovery in consumption.
In Thailand, the planning agency downgraded its annual growth forecasts for the second time this year due to the latest wave of infections, even as the economy contracted less than expected in the first quarter.
Stocks fell 0.4%, while the baht dipped more than 0.2%.
"Asia, lagging well behind the vaccination race, may see its delayed return to normality weighing on its GDP growth prospects this year," Carnell added.
Singapore shares, however, climbed 0.7% after suffering their sharpest fall in 11 months on Friday. The city-state has now closed schools to combat the resurgence of COVID-19 cases.
On Wednesday, the US Federal Reserve will release minutes from an April meeting that predated last week's higher-than-expected inflation data, with the market looking for clues on the Fed's thinking on rates.
While the Fed has argued that a spike in inflation was transitory, pledging to keep interest rates low, the rise has made some in the market predict that policymakers will be forced to act sooner than expected, making the dollar more attractive.