SINGAPORE (April 7): With many countries, including Singapore, going into lockdowns of various extent, the flow of goods, people across borders have clearly been stifled. Policymakers might now be tempted to exercise some form of capital controls, warns Citi’s head of emerging markets economics, David Lubin.
“Experiments with capital controls, in other words, are probably a step closer to us,” writes Lubin in a research note on April 2.
Normally, capital has this natural propensity to move from one market, to another, as the owners seek either higher returns, or, to diversify risks. With the Covid-19 outbreak leading unprecedented economic shock, the uncertainty around expected returns is too high for almost any kind of investor to bear.
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