TOKYO — Asian financial markets remained volatile Tuesday as Chinese stocks plunged again and Tokyo markets also fell sharply after earlier rebounding.
The Shanghai composite index declined 6.9% to 2,987.90 to sit below the psychologically important 3,000 level.
On Monday, China’s benchmark plummeted 8.5%, triggering a wave of major stock markets losses worldwide, including the Dow, which fell 3.6%.
China’s smaller Shenzhen composite index also saw sharp declines, falling over 7% Tuesday.
In Tokyo, the benchmark Nikkei index reversed early gains before falling nearly 4%. That followed a 4.6% plunge Monday to the lowest level seen since late February.
Wall Street stock futures were up about 1% several hours ahead of the U.S. market open.
Some analysts cautioned that the drop in China share prices reflects a necessary market correction.
“Investors are overreacting about economic risks in China,” Capital Economics said in a research note Tuesday. “A combination of poor data and policy inaction in China may have triggered today’s market falls but the bigger picture is that we are witnessing the inevitable implosion of an equity market bubble.”
The volatility followed Monday’s continued downdraft on Wall Street as the Dow Jones industrial average — which was briefly down more than 1,000 points — finished with its second drop of more than 500 points in as many days. The broader Standard & Poor’s 500-stock index tumbled into official correction mode for the first time since 2011.
Hong Kong’s Hang Seng, which also lost 4.6% Monday, fell 0.7%Tuesday. Sydney’s S&P ASX 200 advanced 2.7% to 5,137.30 and Seoul’s Kospi was steady added about 1% to 1,846.63 after shedding 3% the previous day.
China is facing a slowdown in economic growth, the banking system is short of cash, and investors are pulling money out of the country.