The WHO is due to meet later in the day to reassess if the epidemic is now a global emergency, as the death toll in China spiked by 38 to 170 overnight and more cases were reported in other countries.
"The Wuhan virus outbreak has cast a shadow on the prospects of a manufacturing and capital expenditure recovery, just as the clouds over the U.S.-China trade war were clearing," analysts at Maybank Kim Eng said in a research note.
"Countries that are more open and dependent on China trade and tourism will likely be negatively impacted."
There have been confirmed cases of the virus in Vietnam, Singapore, Malaysia and Thailand.
Vietnam shares dropped as much as 2.6%, their most since December 2018, as the market caught up on the heavy selling it missed during the Lunar New Year holiday.
The WHO on Wednesday said it was worried about the person-to-spread of the novel virus in Vietnam.
Financials and real estate stocks accounted for the bulk of losses, with Joint Stock Commercial Bank For Foreign Trade of Viet Nam and real estate developer Vinhomes JSC falling 4.4% and 2.7%, respectively.
Singapore shares lost 0.5%, with transport services provider SATS Ltd dipping 1.5% while property developer CapitaLand Mall Trust declined 2.3%.
Thai shares slipped 0.6% after the trade-reliant country on Wednesday cut growth and exports forecasts for the year, with the financial and energy sectors being the biggest losers on the index.
Export data for December is expected to be released on Friday.
Indonesian shares were 0.4% lower, with non-staple consumer stocks and financials taking the biggest hit.
Astra International slipped 2.2%, while Bank Mandiri dipped 0.6%.
Indonesia's finance minister said on Wednesday the tourism sector would take a hit due to a drop in the number of Chinese tourists, who make up a significant part of its tourist footfalls.
Malaysian shares declined 0.6% and were headed for an eighth straight session of losses.
Conglomerate IOI Corp and chemical producer Petronas Chemicals Group lost as much as 2.2% and 2.4%, respectively.
By Arpit Nayak