Chinese shares plunged 4.47 percent amid global financial turmoil on Tuesday, as investors reacted to losses on Wall Street and the People's Bank of China's (PBOC) decision to slash interest rates.
[ Realted reading: Wall St. plunges amid US financial crisis ]

Debt-heavy property stocks, however, bucked the powerful downtrend, while aviation issues got a lift from China's upcoming space launch.

The benchmark Shanghai Composite Index lost 93.03 points, sinking below the 2,000-point mark to close at 1,986.64. It touched an intra-day low of 1,974.39 late in the afternoon. The Shenzhen Component Index closed at 6,873.61 points, down 61.46 points, or 0.89 percent.

Aggregate turnover was just 47.41 billion yuan (about 6.87 billion U.S. dollars).

Losses outnumbered gains by 1,328 to 325, while 186 stocks were unchanged.

Banks, securities firms and insurers led the plunge. The Industrial and Commercial Bank of China fell 9.95 percent to 3.8 yuan and the China Construction Bank sank 9.94 percent to 4.26 yuan. Northeast Securities lost 6.87 percent to 14.92 yuan.

The heavy-weight financial sector was hurt by a weekend of upheaval among U.S. financial institutions and the global market reaction on Monday, when the Chinese market was closed for a national holiday.

After Lehman Brothers filed for bankruptcy and Merrill Lynch agreed to be taken over by Bank of America, the Dow Jones Industrial Average tumbled 4.42 percent, the steepest drop since the Sept. 11, 2001 attacks.

The Dow's plunge triggered a global equities downturn, with Japan's Nikkei Index falling 4.95 percent and the market in Taipei losing 4.88 percent on Tuesday.

Qin Xiaobin, an analyst with the Beijing-based Yinhe Securities, said the plunge was unexpected and the 1,974.39 close was the lowest since November, 2006.

He attributed the plunge to the lending interest rate cut announced by the Chinese central bank, investors' lingering concern over the country's economy and the financial turmoil in the United States.

On Monday, the PBOC announced the benchmark interest rate for one-year yuan-denominated loans would be lowered 0.27 percentage point on Tuesday, its first cut since October 2004.

Qin told Xinhua that the lending rate cut, without a corresponding change in the deposit rate, dealt a blow to the financial sector since it would hurt commercial banks because of a smaller margin between loan and saving rates.

Eight banks' shares, including the Industrial Bank, the Merchants Bank and Pudong Development Bank, plunged by the 10 percent daily limit, which Qin said was highly unusual.

The interest rate adjustment, however, bolstered investor confidence in the property market and real estate stocks rallied on news of the rate cuts, as the industry relies heavily on bank loans.

Guoxing Rongda Real Estate rose by the daily limit of 10 percent to 6.26 yuan and Poly Real Estate Group gained 4.8 percent to 11.8 yuan.

However, China Vanke declined 0.89 percent to 5.58 yuan. The company is embroiled in a dispute with buyers who have demanded that it reimburse them for price cuts offered after they bought their homes.

According to Qin, investors were very pessimistic, perhaps excessively so, as they didn't foresee an end to the slowdown in the Chinese economy and were very worried over the U.S. financial upheaval.