What’s different 10 years on?

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Norman Villamin, Union Bancaire Privee

Thinking about contagion

After 2008, Norman Villamin, chief investment officer for the private banking division at Geneva-based Union Bancaire Privee, said he learned to think beyond the primary effects of significant events on financial markets.

He recalled the collapse of Lehman Brothers and the domestic situation in the US. At the time, he held the position of head of investment analysis and advice at Citi Private Bank.

Initially, there was confidence that panic in the financial world could be contained. “I remember, even guys like Ben Bernanke at the US Federal Reserve believing the sub-prime [mortgage problem] was ‘very small, no big deal, we can handle it’.

“Tactically it is correct. They can handle sub-prime. But the issue is that it was not about the first round of effects,” he said. “The [subsequent] stages of impact, although they occurred in places far away from the US, were the most meaningful.”

He said it was similar for the currency crisis in Asia 20 years ago.

“When the Asian crisis began, Thailand floated the baht and then immediately after you had contagion to Indonesia, Korea, the Philippines and then Russia.

“It is not the first round of effects necessarily that we care about but we must also think about what are the second, third and fourth rounds that kick in,” he said.

Today, when he evaluates investment risks, he tries to identify where the current hot-spots are and studies the potential contagion on investment decisions.

In today’s context, Villamin takes as an example, China’s reflationary efforts and the weakening renminbi while oil prices remain high.

“I am not so concerned about China, which is certainly safe over the next 12-18 months. But some big oil-consuming countries with weak local currencies that do not have foreign reserves as big as China, could come under high pressure,” he said.

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