Shanghai and Shenzhen started the day on a blistering note -- piling on more than 10 percent -- as they reopened after a week-long holiday that had interrupted a rally sparked by a string of announcements by policymakers aimed at kickstarting growth.
But investors pared those gains as a much-anticipated news conference Tuesday morning -- in which there were hopes for more meat on the plans or another round of pledges -- failed to provide much detail.
Zheng Shanjie, head of China's National Development and Reform Commission (NDRC), said the government was "fully confident" it will achieve its goal of around five percent growth this year -- a target analysts say is optimistic.
That gave traders little reason to press on with a market rally that has seen Hong Kong, Shanghai and Shenzhen bound more than 20 percent higher since the first batch of measures was announced.
Shanghai ended up just 4.6 percent and Shenzhen 8.9 percent, while Hong Kong tanked more than nine percent -- its heaviest loss since 2008 during the global financial crisis.
Oil, which has been boosted by hopes for a recovery in the world's number two economy, sank almost two percent. Uncertainty over China has offset worries about a regional war in the Middle East as Israel considers its response to Iran's missile attack last week.
Iron ore prices fell around four percent.
"After what was hyped as the 'mother of all catch-up bounces', China's markets rally has hit a wall, leaving investors deflated," said Stephen Innes, managing partner at SPI Asset Management.
"The reopening surge from the week-long holiday barely had time to gather steam before fizzling out, and now the once-thrilled bulls are licking their wounds," he wrote.
"With fresh stimulus nowhere in sight, the rally has stalled, and the euphoric 'Dragon Boat' ride has taken a sharp U-turn."
Investors have been racing back into mainland and Hong Kong stocks since authorities last month began announcing plans to reverse a long period of tepid economic growth.
Among the measures unveiled were interest rate cuts, an easing of how much banks must keep in reserve and relaxed rules on buying a home.
The markets have been under intense pressure in recent years as traders fretted over government crackdowns on multiple sectors, with property and tech among those most badly affected.
Most of the pledges were aimed at providing much-needed support to the real estate market, which is a major driver of growth but has been battered by a debt crisis at some of the country's biggest developers.
Heron Lim, at Moody's Analytics, said: "Judging from comments in the press conference, we think that the third quarter will be soft for China but there's enough in the stimulus announced so far to boost fourth-quarter figures enough to reach the annual 2024 growth target.
"Market hopes of even more fiscal stimulus that reaches the 'big bang bazooka' level look dashed... with few details on specific measures."
The big losses in Hong Kong led the rest of Asia lower with Tokyo, Sydney, Seoul, Singapore, Taipei, Wellington and Manila all in the red. However, Mumbai, Bangkok and Jakarta edged up.
In European markets, French luxury brands took a hefty hit on worries about the lack of extra stimulus and chances of recovery in China, with Gucci-owner Kering losing five percent and LVMH down almost four percent. Burberry was down five percent in London.
Meanwhile, cognac maker Remy Cointreau dropped more than six percent in Paris after China announced it would impose anti-dumping measures on brandy from the European Union, the latest salvo in an escalating trade row between Beijing and Brussels.
London's FTSE 100 shed more than one percent and the CAC 40 in Paris was off one percent, while Frankfurt also retreated.
The selling also came after Wall Street's three main indexes closed down around one percent or more, as forecast-busting US jobs data Friday dealt a blow to hopes for a second successive 50-basis-point rate cut.
While the news soothed any worries that the economy could be in danger of slipping into recession, the prospect of borrowing costs coming down slower than thought led to some investors cashing out after last week's record highs.
Close attention will be paid to US consumer prices Thursday and producer prices the following day.
- Key figures around 0810 GMT -
Shanghai - Composite: UP 4.6 percent at 3,489.78 (close)
Hong Kong - Hang Seng Index: DOWN 9.4 percent at 20,926.79 (close)
Tokyo - Nikkei 225: DOWN 1.0 percent at 38,937.54 (close)
London - FTSE 100: DOWN 1.1 percent at 8,214.09
West Texas Intermediate: DOWN 1.9 percent at $75.71 per barrel
Brent North Sea Crude: DOWN 1.8 percent at $79.45 per barrel
Dollar/yen: DOWN at 147.57 from 148.13 yen on Monday
Pound/dollar: DOWN at $1.3076 from $1.3084
Euro/dollar: UP at $1.0995 from $1.0973
Euro/pound: UP at 83.92 pence from 83.86 pence
New York - Dow: DOWN 0.9 percent at 41,954.24 (close)
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