NewWill Chinese markets extend worst post-crisis sell-off in fourth quarter?

The wild swings of Chinese stock markets in the past three months have led to their worst quarterly decline since the 2008 global financial crisis as investors grow increasingly nervous about the Asian giant's outlook and first possible rate rise by the US Federal Reserve in nearly a decade.

Looking to the fourth quarter, analysts are divided over whether the Chinese markets will extend bouts of intense volatility, with some believing the sharp stock sell-off is at an end and a hard-landing scenario in the country's economy is overblown.

The Hang Seng Index closed out September with a 3.8 per cent loss, a minor hiccup compared with the gyrations of the previous two months. However, the third quarter still marked its worst performance since 2011, as the index plunged 20.6 per cent in the July-September period.

Mainland China's benchmark Shanghai Composite Index took an even harder hit. It lost 4.78 per cent in September alone, falling for a fourth month in a row, while also diving 28.6 per cent in the third quarter, the biggest quarterly drop it has seen since March 2008.

Chinese markets have turned "significantly bumpy" since the start of this quarter, when poor economic data and stretched valuations sparked a free fall in Chinese stocks, said Ronald Wan, chief executive of Hong Kong-based Partners Capital International. The surprise yuan devaluation by China's central bank in August further rattled the markets, aggravating and jangling investor nerves.

"In the wake of a worldwide sell-off in equities that began in August, global markets have been in a heightened state of sensitivity," Angus Nicholson, an analyst for IG Group, said in a note.