Stock market Photo: cnsphotos

Chinese shares fell across the board on Tuesday, with the benchmark Shanghai Composite Index closing below a key support level of 3,100 points. 

The Hong Kong benchmark Hang Seng Index also continued a rout, underscoring the risk of spillovers from a bearish pattern that has prevailed among US-traded Chinese stocks in recent days amid a delisting watch list being readied by the US Securities and Exchange Commission (SEC).

Chinese shares are now clearly oversold, a veteran market observer said, arguing against concerns of a liquidity crisis.

The Shanghai index dived 4.95 percent to finish at 3,063.97 points on Tuesday, adding to a 2.61-percent fall on the previous day. The tech-heavy ChiNext market shed another 2.55 percent to end slightly above 2,500 points, after a 3.56-percent decline on Monday.

Panic gripped the Hong Kong market, with the Hang Seng Index plunging 5.72 percent on Tuesday, bringing its losses for the month to 18.92 percent.

Fallout from the Russia-Ukraine conflict, the resurgence of COVID-19 flare-ups domestically, and extreme volatility in US-traded Chinese stocks are weighing on investor sentiment, Dong Shaopeng, an expert advisor for the China Securities Regulatory Commission, said. The market now appears to be oversold. 

It's not a liquidity crisis but rather a panicked selloff that has become entrenched amid multi-pronged uncertainties, Dong told the Global Times on Tuesday.

The fundamentals of the Chinese economy are in good shape, as shown by indicators ranging from retail sales and investment to industrial production in the first two months of the year, official data showed on Tuesday.

Regulatory rifts across the Pacific seem to have amplified an indiscriminate overselling pattern that contradicts the economic fundamentals, analysts said.

The Hong Kong market has been feeling a chill amid a US securities regulatory toughening, which has seen the SEC publish a list of five Chinese firms that may be removed from US exchanges in case of failed compliance with US audit rules targeting Chinese firms.

Responding to the SEC watch list, the China Securities Regulatory Commission (CSRC) on Friday voiced opposition against wrongdoings that politicize securities regulation.

The securities regulator said that it, together with the Ministry of Finance, maintains communications and dialogue with the US Public Company Accounting Oversight Board, which has resulted in active progress. 

Through joint efforts, the two sides can work out arrangements that fit into bilateral laws and regulatory requirements as soon as possible, according to the CSRC.