Chinese stocks plunged more than 8 per cent on Monday, posting their biggest one-day loss since the height of the global financial crisis in 2007 as disillusioned investors dumped shares after Beijing held back expected policy support at the weekend following last week's 11 per cent slide.
The latest tumble, which saw flagship indexes resolutely breaking key support levels, wiped out what was left of the market's stellar gains this year.
The blue-chip CSI300 index tumbled 8.8 per cent, to 3,275.53, while the Shanghai Composite Index slumped 8.5 per cent, to 3,209.91 points, putting it back where it began 2015.
Hong Kong's Hang Seng index fell for the seventh straight day, dropping 5.2 per cent to 21,251.57 points, which analysts blamed both on weak onshore performance and to investors moving money out of yuan-denominated assets after a surprise devaluation in the Chinese currency earlier in August.
All index futures contracts in China slumped by their 10 per cent daily limit, reflecting tumbling share prices and pointing to more bad days ahead.
"Market bears dominate the index futures market... and investor pessimism is growing," Shenzhen-based Bosera Asset Management Co said in an emailed comment on Monday's free-fall.
"Further falls in the indexes would smash market confidence."
The fall spanned every corner of the market, with small-cap growth stocks and state-owned blue chips declining at roughly equal rates.
Highlighting the brutality of the sell-off, only 16 companies trading in Shanghai and Shenzhen were in positive territory. Over 2,000 stocks, or 80 per cent of the total, were down by the 10 per cent daily limit, according to Reuters calculations.
Investor regrets
"I regret not having fled the market last week," said a retail investor who identified herself only by her surname, Zhang.
"With the market falling like this, there's no hope at all. It's already a bear market and the Government is responsible," she said.
Alex Kwok, analyst at China Investment Securities in Hong Kong, said it's difficult to judge whether investors were overreacting, noting that economic fundamentals remained weak.
"This is already a small-scale stock market disaster. Any rebound, if there is any, could be just technical."
The drop came after Beijing failed to make a strong policy move over the weekend to support stocks, as was widely expected after an 11 per cent plunge last week.
Many investors had expected the People's Bank of China (PBOC) would over the weekend cut the amount banks have to keep in reserves, which could boost stocks by increasing market liquidity and address weakness in China's vast manufacturing sector.
No such move materialised, and the only policy support in evidence was an announcement formalising rules allowing pension funds to buy stocks, a policy initiative that had already been trailed.