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

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2021 to Mark the Return of Inflation: Fed Hike by Mid-Year Implies Risk-Off by 2Q/21

India's 2020 Reforms Will Usher in a Decade of Spectacular Growth from 2021 On

China Has Had a Great 2020, but Over-Capacity Will Cause Headaches in 2021

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

December economic pause was followed by a US$900 billion stimulus that will largely be spent in 1Q 2021. The output gap (still 2.8% of potential GDP in 4Q 2020) will narrow sharply this quarter, making it impossible for the Fed to sustain US$120 billion of monthly QE. Whether Biden pushes through a US$1.9 trillion stimulus (without GOP votes) or a more modest US$1.5 trillion one with some GOP votes, it will prove inflationary by 3Q 2021. With the public debt soaring toward 120% of GDP, Biden's corporate tax hike from 21% to 28% will likely be announced (even if conditionally) at his 23 February 2021 speech to a joint session of Congress. We recommend being underweight equities, and long US$ on a 6-month view. The renewed surge in Coronavirus infections in the last two months, and related restrictions on economic activity, contributed both to the December decline in non-farm payrolls and a relatively weak print for real GDP growth in 4Q 2020 (+4%QoQsaar, -2.5% YoY). The output gap, which was 3.5% of potential GDP in 3Q 2020, only improved to 2.8% of potential GDP in 4Q 2020, delaying the onset of inflation risks, keeping both core inflation gauges at 1.5-1.6% YoY at end-2020. However, the US$900 billion fiscal stimulus was only enacted on 27 December 2020, and hence began to boost the economy only in 1Q 2021. If the full Biden stimulus of a further US$1.9 trillion is passed via a reconciliation process (without GOP support), the total of US$2.8 trillion will add 13.3% of GDP to the deficit for FY2021 (already estimated by the CBO at 9% of GDP before the two stimulus packages). That would be more than sufficient to close the output gap by mid-2021. Even a more modest stimulus (US$1.5 trillion) passed with some Republican support, would suffice to close the output gap by July 2021, pushing core CPI inflation above 2% YoY by 3Q 2021. M2 growth (which has plateaued around the 24% YoY handle over the past 8 months) will likely need to be reined-in by 2Q 2021, even if the FOMC is not immediately obliged to raise rates.Biden has already tightened environmental regulations, as promised, by rejoining the Paris Climate accord, imposing a moratorium on oil/gas drilling on federal land and water and revoking the Keystone XL pipeline permit. The two stimulus packages will boost EPS and economic growth. But with the public debt already above 100% of GDP, Biden will likely announce his promised hike in corporate taxes (to 28% from 21%) at his speech to the joint session of Congress on 23 February 2021. That too will slash EPS growth in FY2022 (Oct 2021 to Sep 2022). We recommend staying Underweight Equities, and de-risking portfolios. On a six-month view, we would be long US$.

December economic pause was followed by a US$900 billion stimulus that will largely be spent in 1Q 2021. The output gap (still 2.8% of potential GDP in 4Q 2020) will narrow sharply this quarter, making it impossible for the Fed to sustain US$120 billion of monthly QE. Whether Biden pushes through a US$1.9 trillion stimulus (without GOP votes) or a more modest US$1.5 trillion one with some GOP votes, it will prove inflationary by 3Q 2021. With the public debt soaring toward 120% of GDP, Biden's corporate tax hike from 21% to 28% will likely be announced (even if conditionally) at his 23 February 2021 speech to a joint session of Congress. We recommend being underweight equities, and long US$ on a 6-month view. The renewed surge in Coronavirus infections in the last two months, and related restrictions on economic activity, contributed both to the December decline in non-farm payrolls and a relatively weak print for real GDP growth in 4Q 2020 (+4%QoQsaar, -2.5% YoY). The output gap, which was 3.5% of potential GDP in 3Q 2020, only improved to 2.8% of potential GDP in 4Q 2020, delaying the onset of inflation risks, keeping both core inflation gauges at 1.5-1.6% YoY at end-2020. However, the US$900 billion fiscal stimulus was only enacted on 27 December 2020, and hence began to boost the economy only in 1Q 2021. If the full Biden stimulus of a further US$1.9 trillion is passed via a reconciliation process (without GOP support), the total of US$2.8 trillion will add 13.3% of GDP to the deficit for FY2021 (already estimated by the CBO at 9% of GDP before the two stimulus packages). That would be more than sufficient to close the output gap by mid-2021. Even a more modest stimulus (US$1.5 trillion) passed with some Republican support, would suffice to close the output gap by July 2021, pushing core CPI inflation above 2% YoY by 3Q 2021. M2 growth (which has plateaued around the 24% YoY handle over the past 8 months) will likely need to be reined-in by 2Q 2021, even if the FOMC is not immediately obliged to raise rates.Biden has already tightened environmental regulations, as promised, by rejoining the Paris Climate accord, imposing a moratorium on oil/gas drilling on federal land and water and revoking the Keystone XL pipeline permit. The two stimulus packages will boost EPS and economic growth. But with the public debt already above 100% of GDP, Biden will likely announce his promised hike in corporate taxes (to 28% from 21%) at his speech to the joint session of Congress on 23 February 2021. That too will slash EPS growth in FY2022 (Oct 2021 to Sep 2022). We recommend staying Underweight Equities, and de-risking portfolios. On a six-month view, we would be long US$.    

Dow Jones Industrial Average (INDU INDEX)

Delayed Inflation Risks to Be Re-Ignited by Biden Stimulus as Output Gap Closes