The Asian indexes officially entered a bear market this week, taking the related exchange traded funds (ETFs) and stocks down.

A recent spread of short positions led to panic sell-offs, possibly because of hedge funds unloading on margin calls, reports Daniel M. Harrison for TheStreet.

The Hang Seng went through the biggest two-day decline since the 1997 Asian contagion, ending down 2061 points, or 8.7% at 21,757. China soon followed the island’s movements, going down 354 points, or 7.2% at 4559.  Last Wednesday was the start of the Asian sell-off  when the Hang Seng fell 5.4% in one day, shedding a total of 17.8% in five days.

The sell-off is believed to be a result of short-selling by traders who saw a weakness in key technical support levels last week, and once prices fell below the 23,400 level, hedge funds covered margin calls, causing further declines. Telecom, financials and insurers all slipped to  lows.

Tags: Asia, China, Financial, Telecommunications