Chief Economist & Political Strategist, CrossASEAN Research

Prasenjit K. Basu

Chief Economist & Political Strategist

CrossASEAN Research

At CrossASEAN Research we strive to produce unbiased and differentiated on the ground insights on companies across South East Asia. Our Research is produced for the most part after face to face meetings and conversations with company management to dig deep into the long term vision and strategy of the companies we cover. We seek to deliver investable and actionable themes on sectors and markets across SE Asia, often in collaboration with other Insight Providers across the region, pooling the vast experience of the analysts within the Smartkarma Ecosystem. We also offer bespoke work and tailor made trips for our clients. 

Insights across South East Asia

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Sterling will continue to gain ground as a Conservative electoral landslide becomes near-certain in the election that is barely a fortnight away. A YouGov poll gives Boris Johnson a 68-seat majority, the biggest for the Tories since Margaret Thatcher's heyday. Brexit (an outcome that Thatcher would have welcomed) is now inevitable by end-January 2020, and PM Johnson is likely to be able to secure a good free trade agreement with the EU by the end of next year. Northern Ireland will consequently be reunified with the Republic of Ireland beginning next year. Initially Ireland will be a single customs area from 2020 (separate from the rest of the UK), but that is also likely to mean that the non-sectarian Alliance Party will gain at the expense of the Unionists, making a Sinn Fein-led government in NI very likely (enabling that party to finally lead a government in any part of Ireland for the first time in 102 years since winning a landslide in the Irish seats of the December 1918 general election). Sinn Fein, as a party of government, will work to smooth its rough edges and win over the Unionists, a long-term positive for Eire. Scottish independence, however, will become a more distant prospect. The resurgent Tories will see no reason to allow a second referendum on independence, and the SNP's implicit backing of Jeremy Corbyn will backfire. Corbyn, despite proving a better election campaigner than inter-election polling suggested, has run up against the 30-33% ceiling on a hard-left agenda (although currently polling above the 28% that Michael Foot garnered in 1983). As the Liberal Democrats and the Brexit Party slip further in the polls, it is likely that the Conservatives will win even more overwhelmingly than the polls now suggest, giving Boris Johnson the Thatcherite mandate and mantle he has long sought. The resulting certainty will be good for Great Britain and GBP.

Sterling will continue to gain ground as a Conservative electoral landslide becomes near-certain in the election that is barely a fortnight away. A YouGov poll gives Boris Johnson a 68-seat majority, the biggest for the Tories since Margaret Thatcher's heyday. Brexit (an outcome that Thatcher would have welcomed) is now inevitable by end-January 2020, and PM Johnson is likely to be able to secure a good free trade agreement with the EU by the end of next year. Northern Ireland will consequently be reunified with the Republic of Ireland beginning next year. Initially Ireland will be a single customs area from 2020 (separate from the rest of the UK), but that is also likely to mean that the non-sectarian Alliance Party will gain at the expense of the Unionists, making a Sinn Fein-led government in NI very likely (enabling that party to finally lead a government in any part of Ireland for the first time in 102 years since winning a landslide in the Irish seats of the December 1918 general election). Sinn Fein, as a party of government, will work to smooth its rough edges and win over the Unionists, a long-term positive for Eire. Scottish independence, however, will become a more distant prospect. The resurgent Tories will see no reason to allow a second referendum on independence, and the SNP's implicit backing of Jeremy Corbyn will backfire. Corbyn, despite proving a better election campaigner than inter-election polling suggested, has run up against the 30-33% ceiling on a hard-left agenda (although currently polling above the 28% that Michael Foot garnered in 1983). As the Liberal Democrats and the Brexit Party slip further in the polls, it is likely that the Conservatives will win even more overwhelmingly than the polls now suggest, giving Boris Johnson the Thatcherite mandate and mantle he has long sought. The resulting certainty will be good for Great Britain and GBP. 

Boris Johnson on Course to a Landslide that Will Enable Him to Deliver Brexit on Schedule

REAL-Economics.com

Thematic (Sector/Industry)

The mid-term elections next month take on additional significance because a Democratic majority in the House will alter the fiscal arithmetic, making it difficult for President Trump to sustain the growing fiscal deficits (hence stimulus) that are currently projected for next year and 2021-22. The US fiscal deficit narrowed steadily during the Obama years, from 9.8% of GDP in FY2009 to 2.5% of GDP in FY2015, before widening to 3.2% of GDP in FY2016 and 3.5% in FY2017. Last December's tax cuts widened the fiscal deficit to 4.7% of GDP in FY2018; this stimulus worth 1.2% of GDP has played a big role in bolstering and extending the US economic recovery.  With the US monetary base shrinking by 8.6% YoY (US$337bn) in the 12 months to end-August 2018 (amid the Fed's deliberate shrinking of its balance sheet), US money supply (M2) grew only 4.2% YoY in August 2018. With core inflation (as measured by the core PCE deflator) up 2% YoY, this pace of monetary expansion would normally have left little room for real GDP growth -- but for the big dose of fiscal stimulus. The much-ballyhooed dropping of the term "accommodative" from the FOMC statement last week changes little: the real Fed Funds rate (using core PCE inflation) was rarely negative in the 30 years to September 2008; then it was consistently negative for 10 years, so monetary policy was clearly accommodative. But it isn't yet neutral, so another rate rise is certain this year, and 3 remain likely next year (if Congress continues to be Republican-controlled). The latest RCP polling continues to suggest that the Democrats have a nationwide lead of 7.4-8pp in House races, which should suffice to flip the House (i.e., deliver a Democrat majority). RCP has 206 seats near-certain to be won by the Democrats, 189 by the Republicans. Of the 40 toss-up seats, Republicans currently hold 38, and Democrats will need to win at least 16 of those to secure a majority. Similarly, the likeliest outcome is for the Democrats to still have 49 seats in the Senate, but the races in Florida, Tennessee, Missouri and Indiana are too close to call (either tied or with leads of less than 1.2pp); if the Democrats win 2 of those, they could gain a Senate majority too (altering the calculus for SCOTUS nominations). From the fiscal standpoint, the growing likelihood of a Democratic majority in the House ensures that Trump will be under pressure to rein in the fiscal deficit for FY2019 (now projected to be well over 5% of GDP) by repealing some of the tax cuts for the wealthy. A smaller fiscal stimulus will slow the economy, but additional tax increases are near-certain to cause a significant fiscal drag (i.e., a reduction in the deficit of over 0.5% of GDP) in FY2020. We expect the bond market to begin anticipating a recession by causing the yield curve to invert by early-2019. The US$ too will lose momentum in early-2019, providing much-needed relief to emerging markets.

The mid-term elections next month take on additional significance because a Democratic majority in the House will alter the fiscal arithmetic, making it difficult for President Trump to sustain the growing fiscal deficits (hence stimulus) that are currently projected for next year and 2021-22. The US fiscal deficit narrowed steadily during the Obama years, from 9.8% of GDP in FY2009 to 2.5% of GDP in FY2015, before widening to 3.2% of GDP in FY2016 and 3.5% in FY2017. Last December's tax cuts widened the fiscal deficit to 4.7% of GDP in FY2018; this stimulus worth 1.2% of GDP has played a big role in bolstering and extending the US economic recovery.  With the US monetary base shrinking by 8.6% YoY (US$337bn) in the 12 months to end-August 2018 (amid the Fed's deliberate shrinking of its balance sheet), US money supply (M2) grew only 4.2% YoY in August 2018. With core inflation (as measured by the core PCE deflator) up 2% YoY, this pace of monetary expansion would normally have left little room for real GDP growth -- but for the big dose of fiscal stimulus. The much-ballyhooed dropping of the term "accommodative" from the FOMC statement last week changes little: the real Fed Funds rate (using core PCE inflation) was rarely negative in the 30 years to September 2008; then it was consistently negative for 10 years, so monetary policy was clearly accommodative. But it isn't yet neutral, so another rate rise is certain this year, and 3 remain likely next year (if Congress continues to be Republican-controlled). The latest RCP polling continues to suggest that the Democrats have a nationwide lead of 7.4-8pp in House races, which should suffice to flip the House (i.e., deliver a Democrat majority). RCP has 206 seats near-certain to be won by the Democrats, 189 by the Republicans. Of the 40 toss-up seats, Republicans currently hold 38, and Democrats will need to win at least 16 of those to secure a majority. Similarly, the likeliest outcome is for the Democrats to still have 49 seats in the Senate, but the races in Florida, Tennessee, Missouri and Indiana are too close to call (either tied or with leads of less than 1.2pp); if the Democrats win 2 of those, they could gain a Senate majority too (altering the calculus for SCOTUS nominations). From the fiscal standpoint, the growing likelihood of a Democratic majority in the House ensures that Trump will be under pressure to rein in the fiscal deficit for FY2019 (now projected to be well over 5% of GDP) by repealing some of the tax cuts for the wealthy. A smaller fiscal stimulus will slow the economy, but additional tax increases are near-certain to cause a significant fiscal drag (i.e., a reduction in the deficit of over 0.5% of GDP) in FY2020. We expect the bond market to begin anticipating a recession by causing the yield curve to invert by early-2019. The US$ too will lose momentum in early-2019, providing much-needed relief to emerging markets.     

Fiscal Vs Monetary: Trump's Economy Grows Despite Fed's BS Contraction; Dems Could Alter that in '19

United Kingdom

iShares Core S&P 500 UCITS ETF is an exchange-traded fund incorporated in Ireland. The investment objective of the Fund is to deliver the performance of the S&P 500 Index, less fees and expenses of the Fund. Settlement: ICSD.

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Boris Johnson on Course to a Landslide that Will Enable Him to Deliver Brexit on Schedule

Sterling will continue to gain ground as a Conservative electoral landslide becomes near-certain in the election that is barely a fortnight away. A...

Prasenjit K. Basu

Fiscal Vs Monetary: Trump's Economy Grows Despite Fed's BS Contraction; Dems Could Alter that in '19

The mid-term elections next month take on additional significance because a Democratic majority in the House will alter the fiscal arithmetic,...

Prasenjit K. Basu

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