By Samuel Shen and Nathaniel Taplin
SHANGHAI (Reuters) - Chinese stocks tumbled again on Tuesday, despite a rebound in markets elsewhere in Asia, as investors despaired at the lack of policy action from Beijing in response to recent data suggesting the downturn in the world's second-largest economy is deepening.
Major Chinese stock indexes nosedived more than 7 percent, hitting their lowest levels since December, following their more than 8 percent plunge on Monday that sent shockwaves through global financial markets. [MKTS/GLOB]
China, one of the main engines of the world economy, has overtaken Greece at the top of the worry list of global investors, who fret its economy is growing at a much slower pace than the official 7 percent target for 2015.
But unlike in July, when Beijing directed hundreds of billions of dollars into the market in an unprecedented rescue operation, policymakers have largely sat on their hands during the latest bout of turbulence, which began last week.
"Global investors are cannibalizing each other. Calling it a market disaster is not an overstatement," said Zhou Lin, an analyst at Huatai Securities.
"The mood of panic is dominating the market ... And I don't see any signs of meaningful government intervention."
The CSI300 index <.CSI300> of the largest listed companies in Shanghai and Shenzhen dropped 7.1 percent, while the Shanghai Composite Index (.SSEC) collapsed 7.6 percent to close below the psychologically significant 3,000-point level. [.SS]
Underscoring the panic gripping the retail investors who dominate China's stock markets, all index futures contracts <0#CIF:> <0#CIC:> fell by the maximum 10 percent daily limit, pointing to expectations of even deeper losses.
After the turmoil in China rocked world equity and commodity markets on Monday, policymakers elsewhere in Asia sought to soothe fears about the broader impact on the global economy.
"I think it's important that people don't hyperventilate about these type of things," said Australian Prime Minister Tony Abbott, whose country is heavily exposed to China, the biggest consumer of its commodity exports.
"It is not unusual to see stock market corrections. It is not unusual to see bubbles burst in particular markets and for there to be some flow-on effect in other stock markets, but the fundamentals are sound."
Japanese Finance Minister Taro Aso also said Chinese stocks, which had more than doubled in the six months to May, had been a bubble that was now bursting.
"There's also suspicion on whether China's official GDP figures reflect the real state of the economy," he told a news conference after a cabinet meeting in Tokyo.
After a year of heady gains, Chinese markets have been buffeted by increasing signs that economic growth is faltering.
This week's vertiginous declines have taken stocks into negative territory for the year-to-date, although Leland Miller, president of China Beige Book International, pointed out that Chinese equity markets have shown little correlation with the real economy - either on the way up or the way down.
"Previous boom-bust cycles in Chinese stocks have also showed little or no connection to (apparent) economic performance," said Miller, whose firm provides anecdotal survey information about China based on the Fed's "Beige Book" model.
"Investors can be excused for overreacting to China fears, since without better visibility into the actual condition of China's economy, most prefer to remain cautious."
While there is little evidence that the stock market mayhem has dampened consumer spending so far, concerns about the economy have intensified after factory activity shrank at its fastest pace in almost 6-1/2 years and the central bank unexpectedly devalued its yuan currency earlier this month.
Investors were disappointed by a lack of further central bank action over the weekend, which some said would have been justified both by the weak preliminary manufacturing readout for August and by last week's stock market slide.
"How can investors stand slumps like this?" said a 76-year-old retired worker in Shanghai, who only gave his surname Gao. "The government has messed up the market. It's wrong for the government not to rescue it."
A majority of analysts, however, predict a continued deceleration - rather than a crash - for China's economy, and dismiss comparisons with the 2008 Global Financial Crisis or the 1997/98 crisis in Asia.
"The current panic is essentially 'made in China'. The recent data from other major economies have generally been good and there is little to justify fears of a major global downturn," wrote economists at Capital Economics.
"China's recent economic data suggest that growth remains sluggish, but are not weak enough to justify fears of a hard landing."
Some companies, too, have sought to reassure investors that China's economy is not about to go over the cliff.
Apple Inc (AAPL.O) Chief Executive Tim Cook took the rare step on Monday of commenting on the health of the tech giant's business midway through a financial quarter.
Before the opening bell on Wall Street, he wrote in an emailed response to questions that iPhone activations in China had accelerated over the past few weeks.
"Obviously I can't predict the future, but our performance so far this quarter is reassuring. Additionally, I continue to believe China represents an unprecedented opportunity over the long term," Cook wrote. (http://cnb.cx/1hCtRMl)
Boeing Co (BA.N) on Tuesday raised its forecast for China's aircraft demand despite the slowing economy and tumbling stock market.
The U.S. plane maker expects China will buy 6,330 aircraft over the next 20 years, a 5 percent rise from its last estimate. The planes would currently be worth nearly $1 trillion.
(Reporting by Samuel Shen, Nathaniel Taplin and Kazanori Takada in Shanghai, Pete Sweeney in Hong Kong, Devika Krishna Kumar in Bengaluru, Leika Kihara in Tokyo and Lincoln Feast in Sydney; Writing by Alex Richardson; Editing by Kim Coghill)