The global financial environment could change profoundly during the next 18 months, with further contractions in related industries and capital controls inevitable. That is the view of CLSA Global Emerging Markets chief executive Gary Coull. Much of the directional change could be brought about by governments following Malaysia's lead, imposing controls over the flow of short-term capital in order to stabilise currencies and restrict short-term borrowing, he said yesterday. 'My view is that we are more likely seeing the end of an era now, rather than the end of a cycle,' Mr Coull said, adding that it was wrong to assume that the severe correction would be followed by a sustained recovery, simply because that had happened before as cycles turned. A massive over-supply of production in developing economies, as well as over-investment, had been built up without any regard for risk or return or how huge debts in these economies were going to be repaid. The response from some countries was likely to be to restrict the flow of short-term money, although Mr Coull was uncertain which countries were likely to take such action. Capital controls might result in a short-term positive impact, 'but over the medium term those types of controls really raise fundamental and complex issues and have the potential to be damaging and stunting to the free flow of capital', he said. The impact of this could be a sharp fall in market turnover, in turn causing a drop in commission income for brokers and fee income for fund managers. 'Stockbrokers will need to pull in their belts even tighter and I would suspect a massive contraction in the intermediation business is on the cards,' Mr Coull said. 'Many financial people may be well-advised to consider other lines of work. The one inescapable conclusion to all this is a huge downsizing of the financial intermediation process.' In Hong Kong's case, foreign investment had been vital to the city's growth and any moves that scared investors off could have disastrous consequences. CLSA had made its own adjustments - cutting salaries and business costs - earlier this year and was not planning any layoffs, he said. While there would be difficulties resulting from the changing financial landscape, it would not be completely disastrous, he said. 'Different does not mean unprofitable but it does mean all of us in the financial-services sector will need to adjust personally and professionally to the end of short-term capital flows,' he said.