Make no mistake: the rumble that you heard across the stock markets of the world on Monday was the roar of a hungry bear on the prowl.
HONG KONG: Make no mistake: the rumble that you heard across the stock markets of the world on Monday was the roar of a hungry bear on the prowl.
From Japan, through China, Hong Kong, South East Asia and India, all the way through to Europe, stock market boards were awash in red as investors responded to the avalanche of bad economic news coming from the US - and, increasingly, Europe - by stampeding towards the exit door.
“The technical definition of a bear market is a price decline of 20% or more in the stock market index from a recent peak over a 12-month period,” HSBC’s pan-Asia equity strategist Garry Evans told DNA Money.
“On that count, some of Asia’s equity markets are in a bear market.” China’s H-share index is down more than 30% since it peaked in October, and even Hong Kong’s Hang Seng Index is down 25% since that October high.
“It’s worrying to see European markets - which are usually low on volatility - down 6-7% today, particularly when the lead from the US on Friday was not overly negative,” says Evans. “It’s also quite a concern that the markets didn’t react positively to the fiscal stimulus package that was announced in the US. I guess the perception is that it’s too little, too late.”
Going forward, Evans says, volatility will remain high. “It’s not yet confirmed that the US is in recession, but the risk is clearly high up there.”
Yet, in his reckoning, investors are probably not giving enough credit to the factors that might offset all this bad news.
“People have an eye on the worries, and they’re missing the fact that there are going to be some offsetting factors… Don’t forget that the US Federal Reserve is quite aware of all this. We’ll have a Fed rate cut by the end of this month.”
In fact, says Evans, “I won’t be surprised to see the Fed come in any day with an interim meeting to announce an emergency interest rate cut.”
Would that signal a panic reaction? “I think we’re having the panic already. At this stage, investors will only take it as a sign that the Fed is responding in a proactive way.”
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
)
){kind=small}
){kind=small}
)
)
)
)
)
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}