China's main stock indexes resume downward spiral, CSI300 down 2.66 per cent

"There has already been a turnaround in policy and liquidity elements, but the situation of slowing economic growth has not improved, and the Sino-U.S. trade conflict, in particular, has boosted pessimistic expectations," Guosheng Securities analysts said in a note.

China's main stock indexes resumed a downward spiral Tuesday, a day after the blue-chip index posted its biggest gains in nearly three years, as investors remained pessimistic about economic prospects and risks posed by shares pledged for loans.

At the close, the CSI300 index was down 2.66 per cent. The Shanghai Composite index lost 2.26 per cent.

The CSI300 has lost 7.4 per cent this month, and the Shanghai index is down 8 per cent.

"There has already been a turnaround in policy and liquidity elements, but the situation of slowing economic growth has not improved, and the Sino-U.S. trade conflict, in particular, has boosted pessimistic expectations," Guosheng Securities analysts said in a note.

Coordinated messages of support from senior Chinese officials on the weekend - aimed at easing investor concerns over the risks posed by 4.3 trillion yuan ($619.58 billion) worth of shares pledged for loans - helped China's markets to rally on Monday, driving the CSI300 to its strongest day since November 2015.

But on Tuesday, despite more official pledges of support for private firms, enthusiasm had disappeared among both onshore and offshore investors.

"There was a big turnaround last Friday when the authorities came out to save the market. But ultimately, foreign investors don't buy this story," said Steven Leung, Sales Director at UOB Kay Hian.

Sectors fell across the board. The financial sector sub-index ended 2.19 per cent lower, the consumer staples sector fell 5.98 per cent, the real estate index lost 2.36 per cent and the healthcare sub-index gave up 2.71 percent.

Some 17.83 billion shares changed hands on the Shanghai exchange, about 143 per cent of the market's 30-day moving average of 12.49 billion shares a day.

The securities sector sub-index, which was up 1.3 per cent at the midday break on hopes that market support from regulators would benefit brokerages, ended down 0.19 per cent. It had risen by the 10 per cent daily limit on Monday.

Stocks fared no better in Hong Kong, with the main Hang Seng Index closing down 3.08 per cent.

"Investors have digested the news around the policy support," said Ben Kwong, head of research at KGI Asia.

"Their focus is turning to what's happening in global markets, earnings of Hong Kong-listed companies and news around US-China relations," he said.

Asian markets fell on Tuesday as sentiment was affected by concerns about Saudi Arabia's diplomatic isolation and fresh worries about trade wars.

As of 0906 GMT, MSCI's Asia ex-Japan stock index was off 2.12 per cent.

In Japan, the Nikkei index closed down 2.67 per cent.

In Hong Kong, the index for Chinese companies lost as much as 3 per cent before ending the day down 2.44 per cent.

Concerns about yuan weakness also weighed on the share prices of Hong Kong-listed Chinese firms and helped to drag down the Hong Kong market.

"A lot of the companies here are Chinese companies, their profits are in RMB but their shares are sold in the Hong Kong dollar," said Patrick Yiu, managing director at CASH Asset Management.

The yuan steadied on Tuesday after hitting a more than 21-month low in the previous late night session. At 0721 GMT, the yuan was trading at 6.9391 per U.S. dollar, 0.08 percent firmer than its close of 6.9444, the weakest such close since Jan. 3, 2017.

Chinese government bond futures rose as the stock market fell. Chinese 10-year Treasury futures for December delivery, the most traded contract, were up 0.22 per cent at 95.330.  

(With inputs from agencies.)