Chinese stocks plunged nearly 9 percent Tuesday, their biggest drop in a decade, rattling markets from Hong Kong to Singapore and as far away as New York amid fears of a slowdown in China's economy.
Investors were also spooked by comments Monday from former Federal Reserve Chairman Alan Greenspan, who said a recession in the US was "possible" later this year.
One day after sending Shanghai's benchmark index to a record, investors dumped stocks to lock in profits amid speculation about a fresh round of austerity measures from Beijing to slow the nation's sizzling economy. The Shanghai Composite Index tumbled 8.8 percent to close at 2.771.79, its largest decline since it fell 8.9 percent on Feb. 18, 1997, at the time of the death of Communist Party elder Deng Xiaoping.
"The (rumors) that China is going to impose a capital gains tax resulted in regional markets falling," said S. Sharath, an analyst with MIDF-Amanah Investment Bank in Kuala Lumpur, Malaysia, where the benchmark index tumbled 2.8 percent.
But Greenspan's comments also took a heavy toll on Asian markets.
"Our economy is also dependent on the US economy, if there is adverse news, exports from our country is going to drop," Sharath said.