A brief glimmer of hope that China would unleash more economic stimulus helped to lift stocks on Tuesday but the bloodletting resumed with a vengeance yesterday.
The toxic cocktail of slumping oil prices, gloomier forecasts by the International Monetary Fund (IMF) and ongoing geopolitical tensions around the world gave investors plenty of reasons to bail out again.
The sour mood sent the benchmark Straits Times Index down 2.98 per cent, or 78.7 points, to 2,559.77, its lowest since October 2011.
Commodity players led the losses, followed by Sembcorp Industries, which fell 24 cents to $2.30 on market talk that it may inject funds into oil and gas unit Sembcorp Marine or buy full control of the firm.
SembMarine was the only gainer among the STI constituents, rising half a cent to $1.485.
Property plays also took big hits amid concerns about rising interest rates and as developers face a looming deadline at the end of the year.
Under rules that kicked in from December 2011, developers have to complete a residential project and sell all the units within five years, or pay an Additional Buyer's Stamp Duty of 15 per cent of the purchase price of the site.
Regional bourses also hit multi-year lows, with Hong Kong sliding 3.8 per cent, Shanghai tumbling 1 per cent, Tokyo sinking 3.7 per cent and Sydney falling 1.3 per cent.
On Tuesday, both oil and regional stock markets enjoyed a boost when China said its economy had grown 6.9 per cent last year.
It was the slowest pace of growth for the country in 25 years, prompting traders to raise bets that the government would inject more stimulus into the economy.
The joy was short-lived, disrupted by a sombre report from the IMF, which slashed its growth outlook given the challenges facing major world economies, including the commodity collapse, a strengthening US dollar and political tensions.
Predictably, oil prices resumed their fall, with the US benchmark dropping below US$28 a barrel.
This, coupled with a further weakening of the yuan, triggered the fresh rout on Asian bourses.
"Part of the problem is there has been a drop in confidence... We've seen problems that were not credibly dealt with in the stock market in China, which takes away some confidence in policy management," said Mr David Mann, Standard Chartered's regional head of research for Asia.
"The currency weakened again, which has people worried about China's true intention: Is this an attempt to weaken the yuan to boost growth? If that is the case, then that would be a panic move, and so the markets are panicking."