Chief Economist & Political Strategist, CrossASEAN Research

Prasenjit K. Basu

PK Basu has 34 years experience covering Asia's economies and markets (equities, fixed income and currencies), including 20 years covering the global economy. He was Chief Economist (SE Asia & India) at Credit Suisse First Boston for 5 years, and Chief Asia (x-Jpn) Economist at Daiwa Securities for a similar period. Among other roles, he was global head of research at Maybank Kim Eng, Malaysia equity research head and chief ASEAN economist at Macquarie, Chief Economist at ICICI Securities, ASEAN economist at UBS and the first chief economist at Khazanah Nasional (where he was co-head of research, and led all agri-business initiatives). PK Basu started his career in the Asia Service of WEFA (Wharton Econometrics) in Philadelphia in 1990, rising to be Director of their Asia Service in June 1994. 
PK's book, "Asia Reborn: A continent rises from the ravages of Colonialism and War to a New Dynamism" won the Tata Literature First Book Award (non-fiction) for 2018. It is the first single chronicle of the modern economic and political history of the whole of Asia (from Iraq and Turkey to Korea and Japan, and everything in between), told from an Asian perspective.

Chief Economist & Political Strategist

China to Decelerate: Overcapacity Weakens FAI, Capital Flight Limits Monetary Ease

China Has Been the Global Winner from the Liquidity Glut of 2008-21; Now Comes Pain

Biden Stimulus+ Will Be Inflationary; Policy Stability Is Enabling a More Leftward Tilt

Biden's "Socialist" Remake of the US: How Much Will Be Too Much for the Blue Dogs?

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

China's foreign reserves in May 2021 (US$3.22 billion) are the same as they were 5 years ago (in April 2016), although China has consistently had current account surpluses during those 5 years and been a net recipient of FDI inflows. Last year, the current account surplus was 1.9% of GDP, net FDI inflow was an estimated 1% of GDP, but foreign reserves increased by just US$109 billion (0.7% of GDP), implying that net capital flight was 2.2% of GDP in 2020. In 1Q 2021, the current account surplus was US$75 billion, but foreign reserves declined by US$47 billion -- implying net services and capital outflow of US$122 billion (3.5% of quarterly GDP). This is partly seasonal, but illustrates how difficult it will be for China to keep funding ambitious BRI projects. After the big devaluation (from RMB8.7/US$ to RMB5.8/US$) at the beginning of 1994, the RMB was pegged rigidly for 11 years (until 2005), then appreciated to RMB6.8/US$ by July 2008, staying pegged at that level until late-2010, and appreciating modestly to RMB6/US$ by April 2014. Foreign reserves peaked soon thereafter (at US$3.99 trillion in June 2014), and an implicit new peg (within a wide 8% fluctuation band on either side) at RMB6.7/US$ has existed for the past 5 years. This month is likely to witness mild RMB depreciation, after getting close to the top of the band in May. Mild RMB depreciation provides the only element of monetary easing that is possible currently. Anything more will lead to much larger capital flight. China is, anyway, benefitting currently from a powerful recovery in global trade (which has grown faster than global GDP in Jan-May 2021, after 3 years during which trade under-performed global GDP). Industrial growth will decelerate, especially in 2H 2021 as global (and Chinese) liquidity conditions tighten. FAI (the key driver of China's growth over the past 20 years, including in 2Q-4Q 2020) has already decelerated to 2.8% YoY growth in April 2021, and will likely remain sluggish for the rest of the year. We would recommend moving rotating away from the tech sector to consumer cyclicals in China.

China's foreign reserves in May 2021 (US$3.22 billion) are the same as they were 5 years ago (in April 2016), although China has consistently had current account surpluses during those 5 years and been a net recipient of FDI inflows. Last year, the current account surplus was 1.9% of GDP, net FDI inflow was an estimated 1% of GDP, but foreign reserves increased by just US$109 billion (0.7% of GDP), implying that net capital flight was 2.2% of GDP in 2020. In 1Q 2021, the current account surplus was US$75 billion, but foreign reserves declined by US$47 billion -- implying net services and capital outflow of US$122 billion (3.5% of quarterly GDP). This is partly seasonal, but illustrates how difficult it will be for China to keep funding ambitious BRI projects. After the big devaluation (from RMB8.7/US$ to RMB5.8/US$) at the beginning of 1994, the RMB was pegged rigidly for 11 years (until 2005), then appreciated to RMB6.8/US$ by July 2008, staying pegged at that level until late-2010, and appreciating modestly to RMB6/US$ by April 2014. Foreign reserves peaked soon thereafter (at US$3.99 trillion in June 2014), and an implicit new peg (within a wide 8% fluctuation band on either side) at RMB6.7/US$ has existed for the past 5 years. This month is likely to witness mild RMB depreciation, after getting close to the top of the band in May. Mild RMB depreciation provides the only element of monetary easing that is possible currently. Anything more will lead to much larger capital flight. China is, anyway, benefitting currently from a powerful recovery in global trade (which has grown faster than global GDP in Jan-May 2021, after 3 years during which trade under-performed global GDP). Industrial growth will decelerate, especially in 2H 2021 as global (and Chinese) liquidity conditions tighten. FAI (the key driver of China's growth over the past 20 years, including in 2Q-4Q 2020) has already decelerated to 2.8% YoY growth in April 2021, and will likely remain sluggish for the rest of the year. We would recommend moving rotating away from the tech sector to consumer cyclicals in China. 

China: Rising Capital Flight Suggests Limits to Further Monetary Stimulus This Year