Hang Seng Index lowest since July 2008

On my way back from work, I saw the news in MTR kept showing that Hang Seng Index plummeted today. Down by 5.66% to 19,330.  And a lot of Asian market were experiencing the same bear market situation.

Source: http://www.ft.com/intl/cms/s/0/293bfe52-c282-11e0-9ede-00144feabdc0.html#axzz1UXNx2RTE

Shares in Hong Kong suffered their worst day since the depths of the financial crisis in 2008 as huge sell-offs across the region prompted authorities in South Korea and Taiwan to intervene in the markets.

The Hang Seng index tumbled 5.7 per cent to 19,330.70, the lowest level since June 2010 and its worst one-day fall since a 12.7 per cent slide in October 2008. The index closed more than 20 per cent down from its recent high, the standard definition of a bear market.

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In Seoul, foreign selling drove the Kospi down nearly 10 per cent before state funds stepped in to provide support. After the market closed, South Korea’s regulator said it would ban short selling for three months.

Source: http://www.reuters.com/article/2011/08/09/markets-hongkong-china-stocks-update-idUSL3E7J92ED20110809

Investors covered some short positions in the afternoon session, trimming losses ahead of the Federal Reserve’s policy-setting committee meeting later in the day, but a fresh selloff hitting Europe suggested sentiment on equities could deteriorate further.

“Talk of government funds buying stocks in Korea, Taiwan and Australiaseems to have supported the markets. A lot of these indices are deeply oversold,” said Tom Kaan, a Hong Kong-based director at Louis Capital Markets.

“But all eyes are on the FOMC right now for some sort of credible stimulus. If that isn’t forthcoming, then I expect some real money hanging on to longs bailing out,” Kaan added.

The Hang Seng benchmark closed down 5.7 percent at 19,330.7 points, its sixth-straight loss, sinking to its most oversold level on the charts since the 1997 Asian financial crisis as turnover surged to its second-highest in nine months.

On October 27, 2008, the Hang Sang tumbled 12.7 percent.

With today’s fall, the benchmark is now down 22.6 percent from its cyclical high in mid-November 2011, meeting the technical definition of a bear market.

Here is the “technical” definition of  “bear market”:

“A situation in which a large number of indices lose a significant percentage of their value over the medium or long term. While there is no hard-and-fast definition of a bear market, many analysts consider a 20% loss in the Dow Jones Industrial Average or the S&P 500 to be a good rule of thumb. It is difficult to make a positivereturn on stocks during a bear market, and some investors move into bonds. This leads to the sale of more stocks, and the bear market can become self-sustaining. Technical analysts attempt to find the bottom of bear markets and identify buy signals, but this is risky. A bear market is different from a recession, but one can lead to the other.”

And while looking for that, I ran into this little video that explains how bullish thoughts and bearish thoughts form the dynamics of the market. Good to refresh your related knowledge: