Shanghai: Shanghai stocks tumbled on Tuesday, extending their steepest four-day rout in almost 20 years after worries about China's faltering economy sent world markets reeling, but other Asian stocks bounced back from heavy early losses.
A slump in Chinese shares sparked panic across global markets on Monday, wiping some $2.7 trillion off world equities as markets from London to Buenos Aires were caught up in the plunge.
The dollar hit a seven-month low against the yen in New York -- prompting a warning from Japan -- while US oil finished below $40 a barrel for the first time in six years.
Most Asian bourses cast off heavy early falls Tuesday as sentiment improved, with Hong Kong up 0.72 percent in afternoon trading while Sydney added 1.96 percent and Seoul climbed 0.96 percent.
Tokyo scraped back from heavy early losses by the break but turned lower again in the afternoon, down more than three percent, while Shanghai fell 5.82 percent -- extending its worst four-day sell-off since 1996.
"Our bottom line is that the world's still not a bad place," David McDonald of Credit Suisse told Bloomberg News.
"It's just a case of whether you would want to rush in now or perhaps wait until it settles down a bit more."
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 could taper a massive share market rescue package helped push Shanghai down 8.49 percent on Monday, wiping out the year's gains in its biggest daily slump since February 2007.
Capital Economics said investors had been "overreacting about economic risks in China", arguing that the "the collapse of the equity bubble tells us next to nothing about the state of China's economy".
The yuan's daily reference rate against the dollar was set lower for the first time in nine sessions on Tuesday at 6.3987.
'Step up'
Chinese shares have been on a roller-coaster ride after a year-long debt-fuelled rally collapsed in mid-June, prompting the government to unleash a vast support package that has included using state vehicles to support the market.
In the latest move, Beijing said on Sunday it would allow the state pension fund -- which had 3.5 trillion yuan ($546 billion) of assets at the end of 2014 -- to buy stocks.
The People's Bank of China, the central bank, also said on Tuesday it had injected 150 billion yuan into the money market to ease tight liquidity.
But mainland investors are worried that support could start to taper and they are now waiting to see if the "national team" will intervene further, or if China's central bank will loosen monetary policy.
"Spending hundreds of billions of US dollars propping up the stock market was clearly costing too much -- even for a country with China's deep pockets," said Angus Nicholson, an analyst at IG Markets.
"The Chinese stock market will likely find its natural level without overt intervention."
The dollar remained weak at 119.15 yen, up from a seven-month low of 118.51 yen in New York on Monday, but dramatically weaker than 122.06 yen seen in US trading on Friday.
The yen has strengthened as investors tend to buy the unit in times of uncertainty, but Japan's Finance Minister Taro Aso warned Tokyo was monitoring the "rough" gains, which could hit exporters.
The euro stood at $1.1560 and 137.71 yen in Tokyo, compared with $1.1606 and 137.55 yen in New York overnight.
Commodity prices recovered after Monday's rout, although oil remained under pressure as dealers expect a global supply glut to continue for the coming years.
US benchmark West Texas Intermediate (WTI) for October delivery was trading at $38.76 in mid-morning Asian trade after closing at $38.24 a barrel on the New York Mercantile Exchange.
Brent North Sea crude for October, the international benchmark, was at $43.18 a barrel after closing at $42.69 a barrel in London, its lowest level since March 2009.
Safe-haven gold traded at $1,153.66, slightly down from $1,154.00 late on Monday but still some seven percent higher than its low this month.
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