Contagion from China’s equity malaise spread across emerging markets on Monday, driving a 4 per cent tumble in the benchmark equity index, while currencies fell 1-2 per cent to multi-year lows against the dollar.

Fears for the world’s No. 2 economy pushed Chinese mainland stocks listed in Shenzen and Shanghai into their biggest one-day fall since February 2007. They lost more than 8 per cent and are now in the red for 2015.

Hong Kong-listed H-shares, which are more accessible to foreign investors, lost 5 per cent.

Selling escalated across emerging markets, taking MSCI’s benchmark equity index to six-year lows and their biggest one-day loss since mid-2013.

“This is a serious crisis of confidence in China. People are asking if this is the start of a Chinese credit crisis and I think risks of that have seriously increased,’’ said Maarten-Jan Bakkum, investment strategist for emerging markets at NN Investments in The Hague.

Regulators’ futile efforts to stem the equity rout have raised doubts about Beijing’s ability to deal with a crisis; meanwhile investors also fled markets such as Philippines and India, which have been relatively resilient.

“When everything is weak, you sell in places where you still have some profit,’’ Bakkum said, noting investors would also evaluate risks of capital curbs or regulatory interventions.

Taiwan for instance is “aggressively evaluating’’ the possibility of a large government fund to buy stocks which plunged to 3-year lows.

“Policymakers somewhere in EM will move in that direction, this always happens in this environment. The question is: will they be successful?’’ he added.

As investors sold stocks and bonds, currencies slumped even as growing doubts about the likelihood of a 2015 US rate rise pushed the dollar index to two-month lows.

As metals prices and Brent crude plumbed multi-year lows, commodity-reliant markets, already in the doldrums, suffered fresh pain. The rand hit record lows to the dollar for its biggest daily loss in 19 months while the Russian rouble lost more than 2 per cent.

Losses on the lira were tempered by falling oil prices which should cut Turkey's current account deficit.

Russian authorities held off intervening on currency markets even though the rouble approached 2015 lows.

“When the central bank intervened in the past it was a Russia-specific move related to sanctions. Now, we are seeing the same story in Mexico, Malaysia, Colombia and other countries reliant on oil,’’ said TD Securities strategist Cristian Maggio.

“When oil prices fall, the currency adjustment is a natural shock absorber and going against that would inflict bigger damage on the economy.’’

Gulf markets also suffered, with Saudi stocks down 3 per cent following Sunday’s 6.9 per cent loss. One-year US dollar/Saudi riyal forwards edged to new 12-year highs as banks hedged against riyal devaluation risks, although a devaluation is seen unlikely for now.

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