With the death toll touching 636 in China, the region's biggest trading partner, China's central bank said the epidemic could disrupt economic activity in the first quarter and was preparing policy options to support the economy.
"Traders will likely sit out Friday's trading session as hopes for a quick fix to the virus clash with the rising count of fatalities and confirmed cases," ING Bank said in a note to clients.
China this week announced steps to combat the virus spread and limit its economic impact, but with deaths rising, cities shut off, flights cancelled and factories closed, global supply chains have been hit.
Philippine shares fell as much as 1%, dragged by losses in financial and industrial sectors, but the benchmark was on track to gain 4% for the week.
The country's central bank, in an expected move, cut its key interest rate after the market closed on Thursday to shield the economy from the impact of the outbreak.
Water utilities company Manila Water fell as much as 10% after port tycoon Enrique Razon's Prime Metroline offered to acquire the company at 13 pesos per share, a 13% discount to Thursday's closing price.
Property developer SM Prime Holdings Inc dropped more than 2%, while conglomerate JG Summit Holdings Inc lost 3%.
Singapore shares were on track to snap three consecutive sessions of gains, hurt by losses among financial and consumer stocks.
Heavyweight Oversea-Chinese Banking Corporation fell 0.6%, while Thai Beverage was 3.7% lower.
Malaysian stocks dropped, although the index was on track to clock gains of more than 1% for the week.
Lender Public Bank Bhd shed 0.5%, while utilities company Tenaga Nasional Bhd fell 0.9%.
Vietnam shares rose, helped by gains in the consumer sector. Vietnam Dairy Products JSC climbed 1.2%, while Saigon Beer Alcohol Beverage Corp jumped 3.7%.
(Reporting by Soumyajit Saha in Bengaluru; editing by Uttaresh.V)
By Soumyajit Saha