The number of deaths in China from the newly identified virus, which emerged in Wuhan city in the central province of Hubei in December, had risen to 361 as of Sunday, according to the National Health Commission.
The Shanghai Composite index shed nearly 9% and lost as much as $420 billion of its value even as the country's central bank cut interest rates on reverse repurchase agreements and pledged to inject $174 billion of liquidity into markets.
Leading losses in the region were Singapore shares which dropped 1.2% to hit lowest since Oct. 18, 2019.
Comfortdelgro Corp Ltd, which operates in nine Chinese cities, fell nearly 2% and was among the biggest percentage loser on the index.
"Sentiment remains very fragile as markets dynamically try to get a sense of when containment will catch up with contagion," Vishnu Varathan, a senior economist at Mizuho Bank, said.
Economic data from China, the region's biggest trading partner, added to the gloom as factory activity slowed in January, while annual industrial profit also fell.
Vietnam stocks, which dropped as much as 4.8% during the day, pared some losses to end 0.9% lower.
Vietjet Aviation JSC plunged 7% after Vietnam briefly halted all flights to and from China including Hong Kong, Macau and Taiwan.
Philippines, which reported the first fatality related to the virus outside mainland China, saw its benchmark index fall 0.9%.
Financials were the biggest drag on the index, with Security Bank Corp hitting its lowest since July 2019.
Malaysian equities extended losses for a tenth straight session.
Palm oil producing firms Sime Darby Bhd and Hap Seng Consolidated Bhd fell nearly 2.4% each after India raised the import tax on crude palm oil to 44% from 37.5% on Saturday.
Indonesian shares fell nearly 1%, weighed down by consumer and communication stocks. The country is slated to report fourth-quarter GDP figures on Wednesday at 0400 GMT.
A Reuters poll showed growth in Southeast Asia's largest economy probably edged up in the final quarter of last year, but full-year growth could slow for the first time in four years.
By Shruti Sonal