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One is Raffles Tower in Singapore, where you can view 1,000-odd ships and boats in The Straits while having an excellent Chinese buffet on the 84th floor. Another is to be found while sitting on the Star Ferry bobbing around Hong Kong harbour gazing at the skyline, where sometimes I swear you can see the buildings grow. You can read as many texts and pieces of research as you like but nothing can replace the experience of your own senses and your own judgment but there may be other less obvious themes that we should be aware of. The tremors in the equity markets of the past few months have not just shaken stockmarket valuations, they have, more importantly, shaken investor confidence. The result has been a flight from riskier areas and a dash to safer harbours as portfolios are “de-risked” for fear of further nervous lurches. The emerging markets sector has been especially affected. After a superb rise of 150 per cent over three years of the MSCI emerging markets index, this useful index saw an initial fallback of some 25 per cent but since then some of these markets have shown some level of stability and even partial recovery. But it may be too early to call for a full recovery, as such movements could be masking a deeper risk that may surface. A key issue for trading markets is liquidity. With deep and liquid transaction volumes, markets can prosper and thrive but when trading threats and concerns enter the market, nervous investors start to withdraw. Valuations at times like this can then be most misleading if not actually useless, as although the technical price of an item may be quoted, if such a value cannot be realised, then what is the real price of your investment asset? As good as you can get. Bearing this in mind, we need to be concerned that although valuations may have retreated, some of the markets themselves seem to have changed in their behaviour and what applied for the last three years may not be applicable over the next few years. For example, watching the astonishing growth in China is exhilarating and, despite the Chinese government’s attempts at economic braking, demand is still increasing. Their latest economic figures illustrated such vigour with 11.3 per cent expansion in the last quarter, which just underlies China’s position as the world’s fastest-growing major economy. Terms such as “overheated and unbalanced” were being used in Hong Kong to describe their mainland parent and thoughts turned to what restraining applications the authorities might apply to try and slow this fevered momentum. Interest rate rises, exchange rate adjustments and investment controls will and are all being considered, and especially to try to move the torrent of capital expenditure and investment over towards a greater level of consumer and domestic consumption. Indeed, the central bank has just increased banks’ reserve requirements to tighten lending controls. No doubt, a combination of such actions will at some stage have an impact and if the related braking measures of the US are taken into account, then there is likely to be an economic slowing of some kind. If and when this occurs, then maybe investors would be wiser to look not just at the impact on those nations but also on the supplying nations of commodities and services – in this case, the other related emerging economies. America’s cold accomp-anied by China’s sneeze could easily become certain emerging economies’ flu so a move back into such markets at too early a stage may be overly optimistic. The longer-term themes for these emerging markets are still applicable but success will not be achieved in a smooth rising line. The recent failure of the WTO Doha round of talks can only underline this. Such failure will delay the speed of development of such nations but it is unlikely to halt it. However, the intractability of such a Gordian knot of restrictive practices and protectionism will take many years of negotiating to unwind, let alone cut through and its detrimental effect should not be underestimated. Nevertheless, take comfort from what you can see in those bustling Oriental harbours. These economies are growing and, in the case of China, nearly a quarter of the world’s population is beginning to copy what the Americans have turned into an art form – becoming professional consumers. Yes the global economy may slow in 2007 but I would not underestimate either the resilience of the American consumer or the enthusiasm of her Chinese counterpart. In the meantime, beware the falling tides of liquidity whereby fund managers may find themselves beached on the sand bars of developing economies and unable to adjust their portfolios with their required alacrity. Lower market values will have the calling allure of a beautiful siren but desire for investment gains should not overtake the discipline of professional portfolio management.