A two-day market rebound was snapped yesterday when oil dipped back down below US$30 a barrel and China said it would slash steel production, a move that will trigger massive job losses.
After rallying on Friday and Monday, Chinese shares led Asian bourses back into the red, with the Shanghai market plunging 6.4 per cent and Shenzhen sliding 7 per cent.
This prompted losses across the region, with Hong Kong down 2.5 per cent, Tokyo losing 2.4 per cent and Seoul slipping 1.2 per cent.
Singapore's Straits Times Index dropped 37.03 points, or 1.43 per cent, to 2,545.61, led by falls in banking and commodity stocks.
Despite rising in the past two sessions, the local market is down 11.7 per cent this year.
The gloom set in after oil prices, which had recovered some ground last Friday and early on Monday, again retreated below US$30 a barrel, not far from last week's 12-year lows.
"We've seen another stampede driven by panic," Mr Yang Hai, an analyst at Kaiyuan Securities in Shanghai, told Reuters.
"There's no good news in sight while investors are being affected by the global 'risk-off' mood."
Chinese shares have now lost 22 per cent of their value since the start of the year due to concerns about an economic slowdown and scepticism over how the central bank is handling the country's foreign exchange policy.
The government announced over the weekend that it plans to cut China's steel production capacity by 100 to 150 million tonnes, only adding to the sour mood.
The move is much needed as the industry has been saddled with surpluses for years - as much as 300 million tonnes, equivalent to three times the amount produced by the world's No. 2 producer, Japan - but it will lead to the loss of up to 400,000 jobs.
The country's State Council, led by Premier Li Keqiang, did not give a timeframe for the move.
But Mr Li Xinchuang, head of the China Metallurgical Industry Planning and Research Institute, said yesterday that "large-scale redundancies in the steel sector could threaten social stability".
It was telling that investors focused on the bad news, while shrugging off the fact that the People's Bank of China pumped 440 billion yuan (S$95.5 billion) into the money market.
The central bank typically does an injection ahead of the Chinese New Year holiday to help ease liquidity to meet surging demand for cash. However, this latest injection is the largest since 2013.
Haitong Securities analyst Zhang Qi told Agence France- Presse: "Fluctuations in global markets, weak fundamentals and the continuation of new share offerings all weighed on the market. The market is already in a downward spiral, so investors tend to be over-pessimistic and all negative effects are amplified."