SINGAPORE (Feb 19): Sharp corrections in the prices of equities, bonds and commodities dominated the headlines recently as the exuberance of financial markets in the past few months gave way to volatility and uncertainty. Some argue that this is just one of those healthy market corrections that will eventually pave the way for another round of upward moves. But others fear that this episode is a prelude to a more prolonged period of financial market weakness. Which is the better explanation and what does it mean for our part of the world?

Two big changes: diminishing liquidity…
If we look beyond the day-to-day turbulence, we can see two big changes that will drive financial markets in the near future: Liquidity conditions for financial markets will tighten and market psychology will be more susceptible to nervousness.

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