SINGAPORE (July 28): The sell-off in China A-shares in Shanghai and Shenzhen continued unabated for a second day this week despite rumours that Beijing was preparing further measures to prop up the markets.

Chinese retail investors who dominate the market are reportedly losing faith that Beijing’s new market measures will have enough teeth to put a floor underneath the market.

At 11 am, the benchmark Shanghai Composite Index was down another 1.9% or 70 points to 3.650 after yesterday’s steep 8.6% fall while Shenzhen Composite Index was down 225 points or 1.85% to 12,267 points after yesterday’s 7.1% decline.

Asian market from Tokyo to Singapore to Mumbai were hammered in the wake of the sell-off.

“Yesterday's sell-off was primarily driven by concerns that Beijing may exit its stabilisation fund prematurely while investors’ confidence is still feeble,” notes Wendy Liu, China Strategist and head of China research at Japanese investment banking giant Nomura in Hong Kong.

Last week, the International Monetary Fund (IMF) urged China to unwind its measures taken to stem a stock sell-off. Chinese officials have responded stating that the stock market measures should be considered temporary.

Last night, stock market regulators in Beijing said government entities would continue buying shares to support the market and warned that it would deal severely with anyone who was engaged in "malicious shorting” of stocks.

Tuesday’s selling began in the backdrop of nasty earnings miss by Nasdaq-listed Chinese Internet giant Baidu which has a secondary listing on SGX. Though Baidu’s profits rose 3.3% in the April-June second quarter, they missed analysts estimates.

Baidu also disappointed on forecasts earnings and revenue estimates for the current third quarter. Baidu forecast current-quarter revenue would rise 34.4 to 37.4% to a range of 18.17 billion yuan ($4 billion) to 18.58 billion yuan, way below 40% revenue gains that many analysts had been looking for.

Baidu shares tumbled 8.7% in the after-market trading on Nasdaq to just US$ 180. Baidu stocks are down nearly 28% since their November peak. Often dubbed “Google” of China, Baidu has been spending heavily to diversify away from its core search advertising business over the past year. It is also focusing on mobile search rather than desktop because more than two-third of China’s Internet users search through smartphones or tablets rather than desktop PCs.