Asia Stocks in a New Bear Market: Strategist
Asian stock markets extended losses for the second day in a row on Tuesday driven by concerns the euro zone debt crisis is worsening. One expert says Asia has already entered a bear market that is here to stay.
"We are in a new bear market. The cyclical bull market that started in March 2009 is dead, it's gone, it's not coming back," said Lim Say Boon, Chief Investment Officer, at DBS.
A bear market is seen as a period of sustained price falls, typically when a broad index declines some 20 percent over a two-month period.
While major Asian indices such as the Kospi (down 18 since the start of August) and the Hang Seng (down 16 percent since the start of August) haven't yet met this definition, they are getting close.
Stocks are coming off a strong bull market rally. Between March 2009 and the beginning of August 2011, the MSCI Asia Pacific Index rose 60 percent.
But, according to Lim, that short, two-and-a-half year cyclical bull market has exposed the structural problems of economies around the world.
He pointed out that government intervention in China and Quantitative Easing in the U.S. have had little effect. “The patient was supposed to get up and walk on his own, but he's still in bed.”
He added that there was a limit to how much “the Chinese can support the Europeans as they have their own issues" – surging inflation and a huge public debt.
As a result, Lim is underweight Asian equities. He advises caution for investors with a short-term view as any rebound would be unsustainable. But for investors with a multi-year horizon, he still recommends buying on the dips.
Correction:A previous version of the story incorrectly quoted Lim Say Boon as saying the cyclical bull market started in March 2008. He actually said March 2009.