Shanghai: Shanghai stocks tumbled 6.41 per cent in early trading on Tuesday, extending the worst plunge for eight years after worries China's faltering economy could hurt global growth sent world markets nosediving.
A slump in Chinese shares sent shockwaves around global bourses on Monday, with the Dow Jones Industrial Average in New York initially plunging more than 1,000 points, or 6 per cent, while European stocks tumbled.
China's benchmark index in Shanghai slumped further on Tuesday morning, dropping 205.78 points to 3,004.13. The Shenzhen Composite Index, which tracks stocks on China's second exchange, dropped 6.97 per cent, or 131.18 points, to 1,751.28.
"Markets across the globe are in kind of a vicious circle now," Gui Haomin, an analyst from Shenwan Hongyuan, told AFP, predicting Chinese shares will keep falling for the immediate future.
Slowing growth in Asia's largest economy has long kept investors on edge but China's shock devaluation of the yuan two weeks ago, following a string of weak economic data, has riled world markets.
Fears Beijing it tapering a massive share market rescue package helped push Shanghai down 8.49 per cent on Monday, wiping out the year's gains in its biggest daily slump since February 2007.
"It's all about the market sentiment now and the market is panicked," Haitong Securities analyst Zhang Qi told AFP.
Other regional markets opened lower Tuesday following the steep falls in Shanghai, but Tokyo, Sydney and Seoul all bounced into positive territory by mid-morning as relived buyers went bargain hunting.
The falls in Chinese shares have defied a government rescue package launched after a huge debt-fuelled rally, which saw the market rise 150 per cent in 12 months, then collapsed in mid-June.
In the latest move, Beijing said on Sunday it will allow the state pension fund -- which had 3.5 trillion yuan of assets at the end of 2014 -- to buy stocks.
Investors are now waiting to see if the "national team", meaning entities buying stocks for the government, will intervene to prop up the market and if China's central bank will further loosen monetary policy.
"With such an unreasonable sell-off, they (regulators) should at least encourage the market and step up," said Zhang of Haitong Securities.
The People's Bank of China, the central bank, said on Tuesday it had injected 150 billion yuan ($23 billion) into the money market to ease tight liquidity.
Funds have been pinched as the central bank has intervened to prop up the yuan currency after the surprise devaluation on August 11.
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