SINGAPORE-Many stock markets across Asia, including Singapore, followed the United States into bear territory after President Donald Trump stopped short of offering a detailed rescue package as the coronavirus outbreak was declared a pandemic.
Adding to fears, oil prices slumped further. The Straits Times Index careened into bear territory for the first time since January 2016.
The last time the STI was in a bear market - when stocks have fallen at least 20 per cent from their recent high - was during the oil price rout in 2016. The STI finished down 3.77 per cent on Thursday, and more than 21 per cent down from a peak of 3,407.02 on April 29, 2019.
In addition to Singapore, stock markets in Australia, Japan, Thailand, the Philippines and Indonesia also followed the Dow Jones Industrial Average's plunge into bear territory.
Signalling more volatility, US stock futures hit "limit down" for a second time this week outside trading hours.
This means that US exchanges halted trading of futures contracts when they drop by more than 5 per cent, acting as a floor until regular trading resumes at the opening.
"The fear factor is high, so wild market swings are not unexpected. In terms of economic data, we probably have not hit bottom yet," OCBC Bank head of treasury research and strategy Selena Ling said.
The crucial ingredient is confidence, now lacking amid the oil price crash, rate cuts and a pandemic. Any rebound should be used as a selling opportunity, according to CGS CIMB Research.
"Unexpected interest rate cuts, with the possibility of more cuts ahead, imply slower growth. Stimulus measures by many countries to cope with Covid-19 imply potential worsening ahead, and the oil price crash intensifies the fear of demand destruction," CGS CIMB said.
Investors yo-yoed between the threat posed by the virus and hopes of government stimulus packages.
Many are worried that the cure may be more painful than the disease as efforts to contain the virus may slow the global economy and dent corporate profits.
Some even question if the cure will work. Australia on Thursday said it would pump A$17.6 billion (S$15.9 billion) into the economy to forestall a possible first recession in nearly 30 years. Perversely, the ASX 200 plunged more than 7 per cent.
"The stock markets' sell-off globally sends a clear signal that investors find it hard to see how this virus can be contained, and whether all conventional policy responses from central banks will really solve the problem," Maybank Kim Eng senior economist Chua Hak Bin said.
"Every government is grappling with how best to contain the spread without completely disrupting the economy and life. If the US and Europe can contain it the way China has in the next month or so, then that will be a positive outcome. If a vaccine comes out in the next few months, that will address a lot of fear. We are dealing with a known unknown, but there are so many unknowns on how this will evolve," he added.
Economists hope a second support package after last month's Budget will lift sentiment in Singapore.
"Round 1 was on the premise that it will be a short shallow recession. But with a sharper and more protracted downturn looming, the second package may have to provide a larger handout to companies and workers as we may see job losses of a more serious magnitude," said CIMB Private Bank economist Song Seng Wun.
"For Covid-19, the supply chain disruption is far more severe now because the global economy is far more integrated. We don't know how long all this will last, so the second package will have to be more substantial, considering how serious this is," he said.