"If you're sitting on profits, with these concerns, it's a very sensible thing to sell," he said. "The last short-term guys this morning are getting out." He noted Sunrise may get "stopped out" of some of its China exposure plays in Hong Kong.
The Shanghai Composite ended down 2.0 percent for a more than 5 percent drop over the past four trading sessions, while the Shenzhen Composite finished down 4.0 percent for a nearly 6 percent decline.
(Read more: Is China's property sector facing a day of reckoning?)
The sharp drop in China's yuan may have been the final straw for many players.
"Too many people were getting on the yuan, with 'the only way to go is up,' but now with the deteriorating China economic data and more concern on China's economy and its financial system, there are funds flowing out of this bet," said Jackson Wong, vice president at Tanrich.
Market positioning had become heavily long the currency. The yuan has attracted considerable foreign investor demand over recent years on its steady appreciation and relative stability.
(Read more: The China risk you may have forgotten about)
The yuan fell below its official midpoint fixing at 6.1184 against the U.S. dollar Tuesday for the first time since September of 2012, sparking speculation that the central bank may be intervening as part of a reform drive toward making the currency more flexible.
As the Chinese currency weakened, the U.S. dollar was fetching as much as 6.1218 yuan Tuesday, up from around 6.0982 Monday, according to Reuters data.