August 9th, 2011
12:40 PM GMT
Hong Kong, China (CNN) – Oh my! In the past 24 hours, three of Asia’s dragon economies have traded in their scales and roars for shaggy fur and whimpers. That’s thanks to the shock from S&P’s unprecedented downgrade of the U.S. debt rating last Friday.
China, Hong Kong and South Korea are now officially bear market economies. They’ve lost at least 20% of their value from their previous peaks.
Today, Hong Kong’s Hang Seng crossed into bear territory after falling 22% from its November 2010 high. China’s Shanghai Composite has fallen 20% from early April. South Korea’s KOSPI Composite has tanked 20% from its recent high in May.
But this may just be the beginning. The gloomy atmosphere has other investors afraid. And if this fog of fear continues to creep across the region, then other Asia-Pacific economies could lose their way and more of their valuations.
Australia and India are already on the verge of walking into the brambles. Since April, the S&P ASX 200 has lost 19.2%; the SENSEX has sunk about 19.7%. Take note: if the ASX falls a mere 0.97% more, then Australia will join the bear club. That’s really not a lot to lose.
And market declines in these countries are serving as signposts to other countries in the region. The signpost that’s up: “Caution: Bears!”
Japan, Singapore and New Zealand will be next to watch. They’ve each lost at least 13% of their values from their recent highs. Relatively speaking, those losses are better than the bear and bear-watch economies. But from an absolutist point of view, they are clearly nothing to be envied.
Hence the flight to safe havens like gold. Spot gold hit another intra-day high of $1782.50 per ounce. In the last 24 hours, its price has jumped more than 3%. Year to date it's soared nearly 24%.
Looking ahead, cashing out of equities and cashing in to safe havens should continue. That’s until someone, some government or some institution does something to break us out of this downward spiral.
Until then we may be lost in the woods, getting cozy with more and more bears.
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