The smaller Shenzhen index ended down 1.2 percent and the start-up board ChiNext Composite index retreated 1.8 percent. The International Monetary Fund (IMF) trimmed its global growth forecasts and a survey showed increasing pessimism among business chiefs as trade tensions and uncertainty loomed on Monday, ahead of the World Economic Forum in Davos. The IMF's warning came shortly after China reported its slowest growth in 28 years for 2018, amid the trade war with the United States and cooling domestic demand.
On Monday, President Xi Jinping said China must be on guard against unforeseen but extreme 'black swan' risks while fending off 'grey rhino' events, which are highly obvious yet ignored threats. In response to the gloomy growth outlook, investors expect China to loosen monetary and fiscal policies to boost growth. But these policies "may take some effect but will not be able to stop economic growth from slowing," especially with the trade war hanging in the air, analysts at OCBC said in a Tuesday note. US President Donald Trump attributed China's economic slowdown to US trade policies in a tweet on Monday, and said it "makes so much sense for China to finally do a Real Deal, and stop playing around!"
The two sides agreed to a 90-day truce in the trade war aat the start of last December. Wei Yi, an analyst at Kaiyuan Securities, argued in a Tuesday memo that it is "normal technical adjustment" for the Chinese stocks to ease after rallying in the previous session, and the wider trend of an equity market recovery stays intact.
Downward pressure will subside once the Shanghai composite breaks its 120-day moving average barrier, though that may take some time, Wei added. The Shanghai index stooped just beneath its 50-day moving average as of Tuesday's close. Around the region, MSCI's Asia ex-Japan stock index fell 0.8 percent, while Japan's Nikkei index closed down 0.5 percent. The largest percentage losses in the Shanghai index were China Securities Co Ltd, down 7.6 percent, followed by Qingdao Topscomm Communication Inc losing close to 7 percent, and Tonghua Dongbao Pharmaceutical Co Ltd down by 6.2 percent.
So far this year, the Shanghai stock index is up 3.4 percent and the CSI300 has risen 4.4 percent. About 15.25 billion shares were traded on the Shanghai exchange. The volume in the previous trading session was 16.34 billion.