Correction or bear market, it's difficult to tell: ASX chief

The head of the Australian Securities Exchange on Tuesday said it is difficult to tell if the drop in global stocks is a correction, or the signs of emerging bear markets.

"There are two schools of thought - one is this is a correction that was probably a little bit overdue," ASX chief Elmer Funke Kupper told local media on Tuesday.

Funke Kupper said this is based on the theory that markets have run ahead of themselves, given that cheap borrowing is likely to be over with the U.S. anticipating interest rate rises in the near term.

"There is another school of thought that says maybe the world economy is not recovering quite as well as everybody had been thinking and therefore we're more into bear territory," Funke Kupper said.

Funke Kupper said it is difficult to call, explaining the gyrations when people get worried.

Investors should consider their own circumstances when deciding how to respond, Funke Kupper said.

On Tuesday, the Australian stock market had a roller coaster ride, plunging 1.5 percent from panic selling at the open before rebounding to post the single biggest daily gain since October 2011.

Local analysts have said Australian investors have woken up to themselves, snapped out of the negative feedback loop and realised there was money to be made.

"There's a sense of rationalism returning to the market today, whereas in the last couple of days it's been fear and sentiment driven," Fat Prophets chief executive Angus Geddes said. Endi