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

Macroeconomics

All the inflation gauges in the US are far above the Fed's 2% inflation target. Headline CPI inflation is at a 13-year high of 5.4% YoY, headline PCE inflation at a 30-year high of 4.4% YoY, and the GDP deflator was up 5.7% QoQsaar in 3Q 2021; the Fed's preferred gauge, the core PCE deflator was up 3.6% YoY in July-August 2021, while the core CPI inflation rate was 4% YoY in September. The reason for the inflation surge is something that we have been predicting since last year -- the excessively rapid increase in money supply (M2), which was up 13% YoY in September 2021, on top of the 24% YoY rise a year ago; it is increasingly clear that the Fed effectively has a M2-growth target of 11-13% YoY, which it has maintained since April 2021. (As we keep stressing, this is much faster than M2 growth in 2009-10, which peaked at 11% YoY because the money-multiplier was depressed at a time when banks were choosing to hold large excess reserves). See our June 2020 insight <a href="https://www.smartkarma.com/insights/labour-market-slack-remains-but-fomc-will-need-to-tighten-by-mid-2021" target="_blank" data-smartkarma-citation="insights:40185" rel="noopener">Labour Market Slack Remains but FOMC Will Need to Tighten by Mid-2021.</a>The ECB's rapidly-shrinking credibility took a massive further hit when the first read on October 2021 inflation showed CPI (HICP) inflation at 4.1% YoY -- after the ECB's policy council chose to keep policy unchanged, stating that its analysis after "a lot of soul-searching" about "inflation, inflation, inflation" had led it to conclude that there was no basis for the market's expectations of even a minuscule rate hike in 2022. The ECB formally targets headline (not core) inflation, and with average inflation in Jan-Oct 2021 already above that (and more than double that target in October 2021), it is ludicrous for the ECB to still be pursuing its PEPP, even at a moderately slower pace. The likely outcome will be near-term appreciation of the Euro -- and sharp unexpected tightening in the Eurozone over the next half year. We would recommend being Underweight Europe, but particularly Italy, Greece, Cyprus and Spain. Near-term Euro strength will likely give way to a strong dollar by March 2022, as the Eurozone faces a new debt crisis with the tightening of monetary conditions in the Eurozone.

All the inflation gauges in the US are far above the Fed's 2% inflation target. Headline CPI inflation is at a 13-year high of 5.4% YoY, headline PCE inflation at a 30-year high of 4.4% YoY, and the GDP deflator was up 5.7% QoQsaar in 3Q 2021; the Fed's preferred gauge, the core PCE deflator was up 3.6% YoY in July-August 2021, while the core CPI inflation rate was 4% YoY in September. The reason for the inflation surge is something that we have been predicting since last year -- the excessively rapid increase in money supply (M2), which was up 13% YoY in September 2021, on top of the 24% YoY rise a year ago; it is increasingly clear that the Fed effectively has a M2-growth target of 11-13% YoY, which it has maintained since April 2021. (As we keep stressing, this is much faster than M2 growth in 2009-10, which peaked at 11% YoY because the money-multiplier was depressed at a time when banks were choosing to hold large excess reserves). See our June 2020 insight Labour Market Slack Remains but FOMC Will Need to Tighten by Mid-2021.The ECB's rapidly-shrinking credibility took a massive further hit when the first read on October 2021 inflation showed CPI (HICP) inflation at 4.1% YoY -- after the ECB's policy council chose to keep policy unchanged, stating that its analysis after "a lot of soul-searching" about "inflation, inflation, inflation" had led it to conclude that there was no basis for the market's expectations of even a minuscule rate hike in 2022. The ECB formally targets headline (not core) inflation, and with average inflation in Jan-Oct 2021 already above that (and more than double that target in October 2021), it is ludicrous for the ECB to still be pursuing its PEPP, even at a moderately slower pace. The likely outcome will be near-term appreciation of the Euro -- and sharp unexpected tightening in the Eurozone over the next half year. We would recommend being Underweight Europe, but particularly Italy, Greece, Cyprus and Spain. Near-term Euro strength will likely give way to a strong dollar by March 2022, as the Eurozone faces a new debt crisis with the tightening of monetary conditions in the Eurozone.  

Inflation Is Entrenched, and Central Bank Credibility Is Sinking, Especially the ECB's

REAL-Economics.com

Thematic (Sector/Industry)

With the third and fourth largest economies in the Eurozone acquiring new governments committed to fiscal stimulus, the EU's existential crisis will be heightened -- unless Germany recognizes the need for it to embrace fiscal stimulus, thereby generating more domestic demand and cutting its current account surplus. In the near-term, Italy's new government will challenge the EU's fiscal rules as it attempts to generate faster economic growth with an aggressive combination of left- and right-wing…

With the third and fourth largest economies in the Eurozone acquiring new governments committed to fiscal stimulus, the EU's existential crisis will be heightened -- unless Germany recognizes the need for it to embrace fiscal stimulus, thereby generating more domestic demand and cutting its current account surplus. In the near-term, Italy's new government will challenge the EU's fiscal rules as it attempts to generate faster economic growth with an aggressive combination of left- and right-wing…

Spain's Socialists Will Test the EU's Fiscal Rules, Even as Populists Rule in Italy

Chart based progressive global trading strategies, Chart Partners

Thomas Schroeder

Chart based progressive global trading strategies

Chart Partners

Chart Partners objective is to discover medium-term cycle turns and profit opportunities before they unfold, within structural trends while preserving capital with clear degrees of risk. We have real return ideas. 

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Technical Analysis

US equities are flirting with a topping sequence if key sectors fail to hold gains. Tech is the underperform short hedge. Transports having trouble clearing 9,500 as small caps fade. XLF met our ideal 25.28 rally objective/projection.NYSE Advance/decline line turned down hard and is now threatening pivot support which is a key trigger for a US equity correction or blow off rise.Cycle call for a turn up in yields, down in gold and oil with a stronger USD increases odds of  US equities fading and seeing the slated 2-4% correction (hard to make money on the downside outside of focusing on EM shorts).T-Note is due for a reaction bounce to 124.70 but the macro bear wedge sets a very bearish tone for a big move up in yield (telegraphing a Fed rate hike) and supporting a DXY break above 101.80. Yield target remains at 2.74% with scope to 3%.DXY break above 101.80 faded. Need to see the Euro break and stay below 1.05 which would induce broader USD strength. Dollar give back window ahead of NFP.EEM dip target at sub 37. Our short pair with the S&amp;P is in gaining some traction. Trade is to buy a March dip below 37 for a rise to 42. Short Turkey average at 89,200. Short Brazil at 70,000+.Long Japan – Fresh long from 18,950 with pivot support at 18,900. Long banks but must break above 200 or fade. Inpex cut (-1.46%). USD/JPY kissed 114.60 barrier and faces pullback to 113.20.Asia shorts – SET 50 short (-5.9%). Small Taiwan pair short w long TSMC. STI 3,135 short. Look to add to Korea short at 275. Probing to short Nifty just under 9,050 (tactical pullback only)Asia longs – Long Nifty from 7,752 (will add on alleged pullback). Long A share fut from 10,050 (disturbing price action). H shares from 9,200. Long Ping An, BABA, CCB and ICBC. Australian banks from 6,658. KOSPI long sold (+3.88%). Long KEPCO at 42.2k. KLSE long sold (+2.29%).Cycles – A number of signals (A/D line triangle resolution) align with equities making an important crest. Game plan is to trim US into strength (Europe perform), put on protection and buy a March correction. Gold and oil reluctant to decline so far.

US equities are flirting with a topping sequence if key sectors fail to hold gains. Tech is the underperform short hedge. Transports having trouble clearing 9,500 as small caps fade. XLF met our ideal 25.28 rally objective/projection.NYSE Advance/decline line turned down hard and is now threatening pivot support which is a key trigger for a US equity correction or blow off rise.Cycle call for a turn up in yields, down in gold and oil with a stronger USD increases odds of  US equities fading and seeing the slated 2-4% correction (hard to make money on the downside outside of focusing on EM shorts).T-Note is due for a reaction bounce to 124.70 but the macro bear wedge sets a very bearish tone for a big move up in yield (telegraphing a Fed rate hike) and supporting a DXY break above 101.80. Yield target remains at 2.74% with scope to 3%.DXY break above 101.80 faded. Need to see the Euro break and stay below 1.05 which would induce broader USD strength. Dollar give back window ahead of NFP.EEM dip target at sub 37. Our short pair with the S&amp;P is in gaining some traction. Trade is to buy a March dip below 37 for a rise to 42. Short Turkey average at 89,200. Short Brazil at 70,000+.Long Japan – Fresh long from 18,950 with pivot support at 18,900. Long banks but must break above 200 or fade. Inpex cut (-1.46%). USD/JPY kissed 114.60 barrier and faces pullback to 113.20.Asia shorts – SET 50 short (-5.9%). Small Taiwan pair short w long TSMC. STI 3,135 short. Look to add to Korea short at 275. Probing to short Nifty just under 9,050 (tactical pullback only)Asia longs – Long Nifty from 7,752 (will add on alleged pullback). Long A share fut from 10,050 (disturbing price action). H shares from 9,200. Long Ping An, BABA, CCB and ICBC. Australian banks from 6,658. KOSPI long sold (+3.88%). Long KEPCO at 42.2k. KLSE long sold (+2.29%).Cycles – A number of signals (A/D line triangle resolution) align with equities making an important crest. Game plan is to trim US into strength (Europe perform), put on protection and buy a March correction. Gold and oil reluctant to decline so far.

S&amp;P sector drivers remain bullish. Financials and transports are due to resume their rise. Small caps a fresh long bet (TNA) out of the flat congestion. Base case calls for a rally to mark an intermediate peak by late Jan/early Feb ahead of a February correction.FX – Call was to reduce USD long exposure on uptick sequence and re load on a pullback at DXY 101.50 and lower. DXY may even re test the 100 breakout point again. USD pullback provided fuel for EM equities to perform and now reversing.T-Note - Bearish from 133 and fresh short at 125. ST yield bias to 2.50% where we expect to fade and see more range work – USD bias impact.Europe – Relative strength versus the S&amp;P waning and due to underperform. Long Eurostoxx 50 but looking for the exit. Euro banks a fresh short at 125-126.Relative – Europe and EM’s shows signs of a relative top versus the S&amp;P.EEM near 37 will shape a tactical top/stall zone for a phase of underperformance assuming the USD finds a foot hold above DXY 100. EEM pair short slice initiated. Turkey short was covered at 77,000 for a minor gain and looking to re set higher.Long Japan – Fresh Nikkei buy support at 19,100-200 gap. USD/JPY seeking a foothold near 114.00.Asia shorts – Short Australia materials/long financials pair and looking to exit bank long. SET 50 short under water by 5.5%. Taiwan top short pair.Asia longs – Long Nifty from 7,752 (looking to add in a big way near dual bottom). H shares from 9,185. Long Ping An, Angang Steel, Tencent and BABA. KOSPI long from 258.85 (SEC topping puts Korea on a weaker path). Long Catcher (-9%). Buy HK property as perform play on dip. CNH – 6.70 is our fresh USD buy zone.Cycles – Patterns suggest the US pushes higher into late January if not early February for an intermediate top. March 2 is the next key date.Asia equity webcast (from our Asia section on page 9)<a href="https://www.screencast.com/t/LNzLyHFaX" target="_blank">https://www.screencast.com/t/LNzLyHFaX</a> 10:58 min.

S&amp;P sector drivers remain bullish. Financials and transports are due to resume their rise. Small caps a fresh long bet (TNA) out of the flat congestion. Base case calls for a rally to mark an intermediate peak by late Jan/early Feb ahead of a February correction.FX – Call was to reduce USD long exposure on uptick sequence and re load on a pullback at DXY 101.50 and lower. DXY may even re test the 100 breakout point again. USD pullback provided fuel for EM equities to perform and now reversing.T-Note - Bearish from 133 and fresh short at 125. ST yield bias to 2.50% where we expect to fade and see more range work – USD bias impact.Europe – Relative strength versus the S&amp;P waning and due to underperform. Long Eurostoxx 50 but looking for the exit. Euro banks a fresh short at 125-126.Relative – Europe and EM’s shows signs of a relative top versus the S&amp;P.EEM near 37 will shape a tactical top/stall zone for a phase of underperformance assuming the USD finds a foot hold above DXY 100. EEM pair short slice initiated. Turkey short was covered at 77,000 for a minor gain and looking to re set higher.Long Japan – Fresh Nikkei buy support at 19,100-200 gap. USD/JPY seeking a foothold near 114.00.Asia shorts – Short Australia materials/long financials pair and looking to exit bank long. SET 50 short under water by 5.5%. Taiwan top short pair.Asia longs – Long Nifty from 7,752 (looking to add in a big way near dual bottom). H shares from 9,185. Long Ping An, Angang Steel, Tencent and BABA. KOSPI long from 258.85 (SEC topping puts Korea on a weaker path). Long Catcher (-9%). Buy HK property as perform play on dip. CNH – 6.70 is our fresh USD buy zone.Cycles – Patterns suggest the US pushes higher into late January if not early February for an intermediate top. March 2 is the next key date.Asia equity webcast (from our Asia section on page 9)https://www.screencast.com/t/LNzLyHFaX 10:58 min.

iShares MSCI Emerging Markets / Technical Analysis

Europe is the weaker relative link with a transition into EM’s assuming the USD bases and EEM is capped at 35.Core risk indicators (USD/JPY, AUD/JPY, Euro banks, GBP, EEM 35 and gold) have not been in lockstep with the S&amp;P upward spike. At a minimum we expect a reversion lower this week to adjust.S&amp;P limited scope to 2,100+ resistance with overhead pressure from bear divergence. Our mistake was to hold the 2,055 half short (covered half at 1,993). Add back at 2,070 was premature. 2,038 is the support to re test.Europe – Eurostoxx 50 short average at 2,862 (add near 2,900). Euro banks continue to imply new lows are in store (key risk matrix input).BOE was the first to hint at stimulus and if other Central banks follow this line we will turn more bullish which would alter our call for fresh lows into mid-July.FX – Looking to square our GBP short closer to our 1.29 target. Euro short at 1.1140 (Euro/GBP cross topping near 0.85). Asia FX not behaving well; USD extended basing with fear that any good July rally will fade at topside range.EEM 35 is our macro line in the sand. EEM 30.50 is pivot support. Continued upside pressure on 35 would imply a bull break (after the next draw down) if the USD cannot muster a sustained rise.Short Japan – Short from 16,730. USD/JPY headed for a re test of 100 macro support. Nikkei 14,000 bear to bull macro turn zone with 14,600 eyed.CNH – Met our ST 6.70 objective. 7.0 macro target. Stay long USD.Asia shorts – Korea 246.50 short. Taiwan 8,610 short with add at 8,800. H share 8,600 short. Short Singapore from 2,870. Cut HK property short for 3.20% loss (was not working). Squared Australian short for 1.84% gain.Asia longs – India long from Nifty 7,752. SEC 1.36m long and 1.49m+ sell level. Thailand SET 50 906 long is a relative buffer. Malaysia offset/relative pair long from 1,645. Big pivot resistances being tested in Korea, Taiwan and HK.Cycles – S&amp;P rise at risk of hard swing lower from 2,100 as a fresh risk off cycle unfolds with NFP trigger. Re measuring downside targets as we prepare for a bullish July cycle turn.

Europe is the weaker relative link with a transition into EM’s assuming the USD bases and EEM is capped at 35.Core risk indicators (USD/JPY, AUD/JPY, Euro banks, GBP, EEM 35 and gold) have not been in lockstep with the S&amp;P upward spike. At a minimum we expect a reversion lower this week to adjust.S&amp;P limited scope to 2,100+ resistance with overhead pressure from bear divergence. Our mistake was to hold the 2,055 half short (covered half at 1,993). Add back at 2,070 was premature. 2,038 is the support to re test.Europe – Eurostoxx 50 short average at 2,862 (add near 2,900). Euro banks continue to imply new lows are in store (key risk matrix input).BOE was the first to hint at stimulus and if other Central banks follow this line we will turn more bullish which would alter our call for fresh lows into mid-July.FX – Looking to square our GBP short closer to our 1.29 target. Euro short at 1.1140 (Euro/GBP cross topping near 0.85). Asia FX not behaving well; USD extended basing with fear that any good July rally will fade at topside range.EEM 35 is our macro line in the sand. EEM 30.50 is pivot support. Continued upside pressure on 35 would imply a bull break (after the next draw down) if the USD cannot muster a sustained rise.Short Japan – Short from 16,730. USD/JPY headed for a re test of 100 macro support. Nikkei 14,000 bear to bull macro turn zone with 14,600 eyed.CNH – Met our ST 6.70 objective. 7.0 macro target. Stay long USD.Asia shorts – Korea 246.50 short. Taiwan 8,610 short with add at 8,800. H share 8,600 short. Short Singapore from 2,870. Cut HK property short for 3.20% loss (was not working). Squared Australian short for 1.84% gain.Asia longs – India long from Nifty 7,752. SEC 1.36m long and 1.49m+ sell level. Thailand SET 50 906 long is a relative buffer. Malaysia offset/relative pair long from 1,645. Big pivot resistances being tested in Korea, Taiwan and HK.Cycles – S&amp;P rise at risk of hard swing lower from 2,100 as a fresh risk off cycle unfolds with NFP trigger. Re measuring downside targets as we prepare for a bullish July cycle turn.

United States

iShares MSCI Europe Financials ETF is an exchange-traded fund incorporated in the USA. The ETF seeks results that correspond to the performance of the MSCI Europe Financial Sector Index. The Fund's constituents are financial companies in the banking, insurance, real estate, and diversified financial services area. The holdings are market cap weighted and domiciled in countries across Europe.

IShares MSCI Europe Fincls Sctr Indx Fd (EUFN US)

IShares MSCI Europe Fincls Sctr Indx Fd (EUFN US)

Inflation Is Entrenched, and Central Bank Credibility Is Sinking, Especially the ECB's

ECB retained its PEPP the day before the 4.1% inflation print. US too has overshot inflation targets, but taper guidance is clear. Near-term Euro...

Prasenjit K. Basu

Spain's Socialists Will Test the EU's Fiscal Rules, Even as Populists Rule in Italy

With the third and fourth largest economies in the Eurozone acquiring new governments committed to fiscal stimulus, the EU's existential crisis...

Prasenjit K. Basu

March Transition

US equities are flirting with a topping sequence if key sectors fail to hold gains. Tech is the underperform short hedge. Transports having trouble...

Thomas Schroeder

US Drivers into January Stall Cycle

S&P sector drivers remain bullish. Financials and transports are due to resume their rise. Small caps a fresh long bet (TNA) out of the flat...

Thomas Schroeder

Risk Overshoot and Reversion

Europe is the weaker relative link with a transition into EM’s assuming the USD bases and EEM is capped at 35.Core risk indicators (USD/JPY,...

Thomas Schroeder