Two men pass the bronze bull at the Shanghai Stock Exchange.

Major stock markets in the Asia-Pacific region closed sharply lower on Monday, with Japan and South Korea seeing significant declines and triggering circuit breakers at times, amid concerns over a possible US recession and escalating tensions in the Middle East.

Despite growing global tensions, experts said that China's role as the world second-largest economy would become more pronounced, as the Chinese stock market has remained resilient and Chinese assets are undervalued, including A-shares, Hong Kong stocks and Chinese concept stocks.

On Monday, South Korea's composite index KOSPI fell by 8.77 percent to 2,441.57 points, marking the largest single-day drop on record. Japan's Nikkei 225 index declined by 12.4 percent to 31,458.42 points, marking a third consecutive day of significant losses and breaking below the 32,000-point threshold.

During Monday's session, trading in both the Nikkei 225 and TOPIX indices in Japan was halted briefly after triggering circuit breakers. South Korea's major indexes also set off circuit breakers, leading to a 20-minute trading halt. This was the first time since March 19, 2020, that South Korea's stock market was suspended due to circuit breakers.

Australian stocks closed down 3.7 percent on Monday, wiping more than $100 billion from the market's capitalization - the biggest fall since the pandemic lockdown era, the Australian Broadcasting Corp reported.

The sell-off was largely attributed to concerns over the poor US economic performance amid heightened worries about an economic downturn, exacerbated by disappointing US nonfarm payroll data from the previous week, prompting further panic in capital markets, according to experts and media reports.

Experts attributed the steep declines to the US Federal Reserve's decision to leave interest rates unchanged, coupled with disappointing economic data, leading to a sharp drop in US stocks. Behind these movements lies a growing investor fear of a US economic recession.

The significant downturns in Japan and South Korea, triggered by the recent decline in the US market, have multiple underlying reasons, Li Changan, a professor at the Academy of China Open Economy Studies of the University of International Business and Economics, told the Global Times on Monday.

"More importantly, it (the stock slump) may reflect fundamental concerns, specifically the unclear economic outlook in the US, with the recent data releases, including labor market indicators, also below expectations," Li said.

There has been speculation among traders that the Federal Reserve will step in with an emergency interest rate cut, according to media reports. However, no official confirmation has been made.

Economists at Goldman Sachs raised the likelihood of the US economy slipping into a recession within the next 12 months from 15 percent to 25 percent.

While world capital markets are bearing the brunt of the possible US economic downturn, China's A-share market is showing its resilience.

On Monday, the Shanghai and Shenzhen stock exchanges fluctuated narrowly while managing to avoid the sharp declines seen in international markets, with many blue-chip stocks rebounding, which is noteworthy.

"Despite the widespread downturn in global markets, A-shares' resilience against declines indicates that previous adjustments have been quite sufficient," Yang Delong, chief economist at Shenzhen-based First Seafront Fund, told the Global Times on Monday.

Moreover, once the European, American and Japanese stock markets begin to decline from their peaks, there may be an opportunity for a turnaround in the Chinese stock market, experts said. "Capital tends to seek new valuation opportunities, and A-shares and Hong Kong stocks are undoubtedly among these attractive valuation areas," Yang noted.

Another positive sign for the Chinese capital market was the surge of the yuan by 1,000 basis points against the US dollar in a single day on Friday, appreciating significantly to about 7.1 against the dollar.

With expectations of gradual interest rate cuts by the Federal Reserve, there is potential for a further appreciation of the yuan, possibly even returning to below 7.0 next year, Yang said, noting that "anticipated appreciation of the yuan could attract inflows of foreign capital, especially considering that high-quality Chinese assets are currently undervalued."

As for whether China can weather this wave of market volatility, Li said that "for China, the substantial prior declines have already alleviated much of this risk," indicating confidence in the country's ability to continue attracting foreign capital, particularly following possible US interest rate cuts. 

"As to how much it may draw in terms of foreign investment, it will also depend on domestic economic conditions and policy developments," he said.