China stocks suffered their sharpest daily percentage decline since 2007, as worries mount that authorities are pulling back on measures to prop up the market.

The Shanghai Composite Index SHCOMP, -0.81% ended down 8.5% at 3,725.56, its second-straight day of losses and worst daily percentage fall since February 27, 2007. China’s main index is up 6% from its recent low on July 8, but still off 28% from its high in June.

The smaller Shenzhen Composite 399106, -0.52% fell 7% to 2,160.09 and the small-cap ChiNext SZX00065, +0.11% closed 7.4% lower at 2,683.45.

Analysts say the selling came as investors fear the government is curbing its buying of blue-chip stocks—and could even be testing whether the market can support itself.

“The previous support from the government funds is apparently unsustainable,” said Fu Xuejun, a strategist at Huarong Securities. “They may withdraw support today to test whether the market has recovered its resilience. The government wants to use state funds to stabilize the market, not to prop it back to 5,000 point overnight.”

Earlier this month, 21 brokerages pledged to support the Shanghai index as long as it stayed below the 4,500 level. Before Monday, China’s main stock market had rallied for three-straight weeks.

Local brokerages estimate that a state-owned fund called China Securities Financial Corp. has spent hundreds of billions of yuan in supporting the market, although authorities haven’t disclosed a total figure.

Monday’s swift fall came as a surprise to many analysts, prompting speculation that officials might step in with fresh rescue measures.

“I am positive that we will see state support emerging again in the next two days,” said Zhang.

Meanwhile, turnover on the A-share market has hovered about 1.2 trillion yuan in recent days, compared with more than 2 trillion yuan before the market slump, according to Qian Qimin from Shenyin Wanguo Securities.

“It means that investors are still uncertain about the impact of any potential policy changes,” Qian added.

“The soft industrial figure number [is adding] downward pressure” said Gerry Alfonso, director of trading at Shenwan Hongyuan Securities. Earlier, data showed industrial profits in China falling 0.3% in June from a year ago, after rising the previous two months.

Elsewhere, other Asian markets declined more modestly, pressured by disappointing earnings results overseas.

The Hang Seng Index HSI, -0.33% fell 2.7%. Australia’s S&P ASX 200 XJO, -0.79% was down 0.2%, the Nikkei Stock Average NIK, +0.17% fell 1%, and South Korea’s Kospi 180721, -1.36% was off 0.4%.

“Investors are on watch for earnings revisions, but are bracing for negativity, after so many high-profile U.S. companies have disappointed with either missed performance numbers or weak forecasts,” said Hideyuki Ishiguro, a strategist at Okasan Securities.

Commodity prices had remained under pressure heading into the weekend, with copper sinking to a six-year low, gold falling to a five-year low, and U.S. oil prices pushing further below $50 a barrel.

Asian currencies continued to feel the pressure of a strong U.S. dollar amid expectations for U.S. interest rates to rise later this year, with some hitting fresh multi-year lows.

The Malaysian ringgit MYRUSD, -0.30% hit as high as 3.8140 against the U.S. dollar, the highest since the currency was pegged in 2007. It was last at 3.8130. The Philippine peso PHPUSD, 0.09 fell to its lowest in five years — it traded as high as 45.560 against the U.S. dollar and was last as 45.530, from 45.50 Friday.

The Indonesia rupiah IDRUSD, weakened amid mounting criticism that Indonesia President Joko Widodo has been slow in implementing reforms and disbursing planned government expenditure to boost the economy. On Monday, the rupiah hit as high as 13,460 against the U.S. dollar from its Friday close of 13,440. The South Korean won KRWUSD, 0.08 fell to a fresh three-year low against the U.S. dollar. It traded as high as 1,173.60 against the U.S. dollar, from its Friday close of 1,167.35.

In Hong Kong, brokerage house Central China Securities 1375, +0.68% is raising 2.53 billion Hong Kong dollars ($326 million) via a share placement in a bid to expand its businesses. The firm said Sunday it has agreed to sell 592.12 million new shares at HK$4.28 each to independent investors, representing about 18.4% of its enlarged share capital. Shares slid 11%.

Some 75% of the net proceeds are expected to expand the firm’s margin financing and securities lending business, with the rest to be used for other investment and to supplement its liquidity. Margin debt was a key factor underpinning the strength of the China rally until mid-June, as well as exasperating the market’s decline thereafter.