China stocks falter in giddy trade as weak PMIs heighten growth fears

SHANGHAI (Reuters) - Chinese stocks got September off to a rocky ride on Tuesday, with main indexes tumbling 5 percent at one point as weak manufacturing data laid bare the daunting challenge faced by Beijing as it races to revive a stumbling economy.

At the end of the session, the markets had managed a recovery of sorts, as rebounds in blue-chips partly offset slides in small-caps.

The blue-chip CSI300 index fell 0.1 percent, to 3,362.08, while the Shanghai Composite Index lost 1.3 percent, to 3,166.62 points.

But small caps posted heavy losses. Shenzhen's growth board ChiNext dived 6 percent and the CSI500 index of small companies tumbled 6.3 percent.

Activity in China's manufacturing sector contracted at its fastest pace in three years in August, an official survey showed on Tuesday, reinforcing fears of a sharper slowdown in the world's second-largest economy. A separate private survey on manufacturing was equally downbeat.

Investors largely ignored fresh stimulus measures unveiled by the government, including further relaxation in property investment rules, and policies to support mergers and acquisitions and share buy-backs by listed companies.

"These measures are inadequate. It's like just trying to put out a big fire with a glass of water," said Yang Hai, strategist at Kaiyuan Securities.

Blue-chips, including banking heavyweights and energy giants PetroChina and Sinopec rose sharply, helping limit losses.

(Reporting by Samuel Shen and Pete Sweeney; Editing by Shri Navaratnam)