CORRECTED: Asian markets sink as Shanghai falls further

Asian markets mostly fell again Tuesday, with Shanghai seeing another round of wild volatility a day after the mainland Chinese market's heaviest one-day losses in more than eight years.

Fears of a resumption of the rout that strafed Chinese shares over a month until July 8 sent global traders running Monday, with Wall Street falling for a fifth day in a row and safe-haven gold edging back up after a recent slip.

The dollar recovered morning losses, although analysts said the latest crisis on Chinese markets could affect Federal Reserve policymakers' decision when considering hiking interest rates.

Shanghai, which collapsed 8.48 percent Monday, was 3.00 percent lower in the afternoon. The benchmark index gyrated heavily through the day, falling as much as 5.0 percent and rising almost one percent into positive territory.

However, Hong Kong was 0.71 percent higher in late trade after slumping more than three percent Monday.

In other regional markets Tokyo eased 0.10 percent, or 21.21 points, to 20,328.89 and Sydney edged down 0.09 percent, or 5.19 points, to end at 5,584.7. Seoul was flat, edging up just 0.27 points to 2,039.08.

Chinese investors rushed for the exit Monday as more data showing the economy still struggling mixed with fears that government measures to prevent a market crash -- including providing vast sums of cash to support shares -- will not last.

The moves -- introduced after a more than 30 percent dive that wiped trillions off valuations in just under four weeks -- had been credited with helping to stem the bleeding, stabilise trading and put prices back on an upward trajectory. The market had surged more than 150 percent in the year to hit a near-term peak on June 12.

Tuesday's losses came despite assurances from Beijing that it will unleash more cash to provide stability to jittery share markets.

State-backed China Securities Finance Corporation (CSFC), which has reportedly already pumped billions of yuan into mainland equities under a government plan, will continue to buy stocks, the state-run Xinhua news agency reported.

"The worst time has passed but we think there is a final leg for this correction," Steve Yang, strategist at UBS Group AG, said. "Fundamentally there is no reason for funds to come in and buy aggressively."

But Castor Pang, head of research at Core-Pacific Yamaichi Hong Kong, warned the latest comments might not be enough without concrete action.

"The government's current intervention was not able to stop the market's slide and only delayed the decline."

- Return of volatility -

Shares had climbed about 17 percent since hitting a trough on July 8.

Analysts said the events could be a key issue on the agenda when the Fed's policy meeting takes place this week. While it is not expected to lift interest rates now, dealers are hoping for some guidance on its plans.

"The return of market volatility in China will be a significant discussion point at the US Fed in terms of what this is telling us about the Chinese economy," Matthew Sherwood, Sydney-based head of investment strategy at Perpetual Ltd., said. "There is a lot of global weakness and significant external risk."

The dollar eased to 123.56 yen early Tuesday, from 123.24 yen in New York and well off the 123.75 yen earlier in Asia.

The euro changed hands at $1.1074 and 136.82 yen against $1.1091 and 136.69 yen in US trade.

Gold, which is considered a safe bet in times of crisis, fetched $1.096.18 an ounce compared with $1.096.60 late Monday but it is much higher than the $1,080.50 at the end of last week.

Oil prices continue to suffer from fears about the global economy as well as an oversupply of the commodity.

US benchmark West Texas Intermediate for September delivery fell 17 cents to $47.22 and Brent crude for September lost 30 cents to $53.17.

In other markets:

-- Taipei rose 0.30 percent, or 25.81 points, to 8,582.49.

Taiwan Semiconductor Manufacturing Co was unchanged at Tw$134.0 while Largan Precision, a leading smartphone camera lense maker, gained 4.05 percent to Tw$3,215.

-- Wellington lost 0.40 percent, or 23.68 points, to 5,848.38.

-- Bloomberg News contributed to this story --

dan/iw/tm