From despair to ecstasy: EKR expects PH, other emerging markets to suck back liquidity ahead of developed countries

Bilyonaryo Rick Razon is optimistic the Philippines and other emerging markets are poised for a strong bounceback after getting slammed by the coronavirus.

Razon expects fund managers to put their money into the Philippines and other emerging markets ahead of developed countries in anticipation of a rapid economic recovery in a post covid world with a vaccine on the way.

“I never hear it mentioned what hasn’t happened – the global financial system and stocks markets have not collapsed, they remain highly liquid. When a crisis like this hits, you hear this sucking sound of liquidity being sucked out of the markets going to safe havens. At the other end of this, the more developed world will have slower growth than emerging markets. When this is over, you’ll have the liquidity start come back to emerging markets,” said the chairman of International Container Terminal Services Inc. and Bloomberry-Solaire in a GoNegosyo forum.

“It was clear to me from the beginning that the Philippines would be the hardest hit because we are the largest consumer economy and the pandemic specifically attacks the consumer. But we will also benefit from the pent-up demand when this whole thing is over,” said Razon.

The Philippine Stock Exchange nosedived to an eight-year low of 4,623 in mid-March following the declaration of Luzon-wide lockdown. The market has recovered more than half to 7,009 as of December 1, just 10 percent short of its 7,800 level at the start of 2020.

“That’s why I say to everybody who asks: If you survived 2020 and 2021, you will be doing very well… we just have to sacrifice and wait it out till our time comes back and our time will come back. Everything is a cycle,” said Razon.

But Razon has a caveat for investors: the hottest growth years in the 20th century happened after the Spanish flu (which lasted two years) but these also led to the Great Depression when the United States and European markets went into a meltdown.

“This (coronavirus) could be the worst, and they seem to get worse and worse from one crisis to the next. The best thing to do is to make sure to be prepared for the next one, surely there will be a next one. But there’s always a silver lining in every crisis. When I was young, I read in a book: There are no desperate situations, only desperate men. That is what I have always kept in mind,” said Razon.

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