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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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

The strong NFP print for November strengthens the FOMC's rationale for pausing rate changes at its next two meetings (next week and late-January 2020). But the job market is an island of strength surrounded by a sea of economic weakness, evident in the dismal ISM manufacturing report, with the PMI and new orders in contraction territory for the 4th consecutive month.  
The seemingly stellar NFP print (+266K for November 2019, versus consensus of 187K) masked the fact that the labour force participation eased to 63.2%, so the U-6 measure of unemployment was 6.9% (still providing a modicum of slack in the broad labour market). The forward-looking ISM manufacturing new orders fell to 47.2 in November 2019, equal to the 10-year low (of Sept 2019). This reliably leads US demand for imports from Asia, and suggests that Asia's exports to the US (the one market that had hitherto stayed robust) will decline in Feb-May 2020. 
This combination is likely to deepen the likelihood of a policy error. The key labour market signal suggests a robust economy (inducing the Fed to remain sanguine, postponing any rate cut), but real GDP and the cyclical manufacturing sector continue to lose momentum. In particular, the economic weakness is primarily on account of a sharpening downturn in business investment spending (the key to future improvements in productivity). With the Fed focused on headline labour market indicators, while core inflation edges lower amid economic slack and the economy steadily loses momentum, there will be no counter-cyclical policy action before March 2020. We expect the economic data to worsen sufficiently to oblige the FOMC to resume cutting rates by May 2020, but the political cycle will make additional rate cuts difficult. Real GDP growth is likely to moderate to a 1% handle by 2H 2020. The equity market is likely to begin anticipating this by early 2020, and we expect a negative year for US and global equities through much of 2020.

The strong NFP print for November strengthens the FOMC's rationale for pausing rate changes at its next two meetings (next week and late-January 2020). But the job market is an island of strength surrounded by a sea of economic weakness, evident in the dismal ISM manufacturing report, with the PMI and new orders in contraction territory for the 4th consecutive month.  
The seemingly stellar NFP print (+266K for November 2019, versus consensus of 187K) masked the fact that the labour force participation eased to 63.2%, so the U-6 measure of unemployment was 6.9% (still providing a modicum of slack in the broad labour market). The forward-looking ISM manufacturing new orders fell to 47.2 in November 2019, equal to the 10-year low (of Sept 2019). This reliably leads US demand for imports from Asia, and suggests that Asia's exports to the US (the one market that had hitherto stayed robust) will decline in Feb-May 2020. 
This combination is likely to deepen the likelihood of a policy error. The key labour market signal suggests a robust economy (inducing the Fed to remain sanguine, postponing any rate cut), but real GDP and the cyclical manufacturing sector continue to lose momentum. In particular, the economic weakness is primarily on account of a sharpening downturn in business investment spending (the key to future improvements in productivity). With the Fed focused on headline labour market indicators, while core inflation edges lower amid economic slack and the economy steadily loses momentum, there will be no counter-cyclical policy action before March 2020. We expect the economic data to worsen sufficiently to oblige the FOMC to resume cutting rates by May 2020, but the political cycle will make additional rate cuts difficult. Real GDP growth is likely to moderate to a 1% handle by 2H 2020. The equity market is likely to begin anticipating this by early 2020, and we expect a negative year for US and global equities through much of 2020. 

Dow Jones Industrial Average (INDU INDEX)

NFP Postpones Any Talk of Rate Cuts Despite Deepening Industrial Sluggishness