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

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

Watch-Out For The Fed’s Big ‘Catch-Up’

Inflation Caused by Monetary Surge; Risk of Stagflation in 2022 Amid Fiscal Tightening

2 Months of Stealth Taper and Mild Delta-Driven Slowdown; but Inflation Still Surging

3 Months of MoM Inflation Oblige Stealth Tightening; Overvalued Equities to Fall

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 FOMC is all but certain to formally announce the start of "tapering" at its next meeting in 6 weeks time (2-3 November 2021), i.e., the formal end to monthly purchases of US$120 billion of Treasury and agency securities. The FOMC statement after last week's meeting was about as clear as the FOMC ever is: "Last December, the Committee indicated that it would continue to increase its holdings of Treasury securities by at least $80 billion per month and of agency mortgage‑backed securities by at least $40 billion per month until substantial further progress has been made toward its maximum employment and price stability goals. Since then, the economy has made progress toward these goals. If progress continues broadly as expected, the Committee judges that a moderation in the pace of asset purchases may soon be warranted."In reality, a moderation in the pace of asset purchases (as reflected in the overall size of the monetary base) has already occurred. In the latest 3 months, the US monetary base increased by a cumulative US$88 billion (i.e., far below the US$360 billion of total increase in asset purchases promised for that period).  This enabled M2 growth to decelerate notably -- from 20.6% YoY in March 2021 and 14.6% YoY in April to 12% YoY in July 2021. With US real GDP growing 6.3% QoQ (saar) in 1Q 2021 and 6.6% in 2Q 2021, M2 growth of over 20% YoY (following the previous year's 20%-plus growth rates) was clearly excessive. But with M2 decelerating to 12% YoY growth, the severity of upward pressure on prices has begun to ease somewhat -- and core CPI inflation moderated from 4.5% YoY in June 2021 to 4.3% in July and 4% YoY in August 2021. The further reining-in of the monetary base over the next few months (and a complete end to QE asset purchases no later than mid-2022) should contribute to a smooth transition to decelerating M2 (8% YoY by the turn of the year) and slightly lower inflation rates -- although both core-PCE and core-CPI inflation are likely to remain above 3% YoY for the rest of 2021. A gradual tightening of monetary conditions (already underway for 3 months, but being formalized in the period ahead) will steadily push bond yields higher and steepen the yield curve. The predictable steepening of the curve will be positive for banks, and the strengthening economic recovery will boost earnings across the economy. We remain wary of the long-term implications of CAPE (Shiller's cyclically-adjusted P/E ratio), which at 38.3x is at its highest since the 2000 peak. But near-term, the conventional P/E ratio will moderate (from 34x currently), so we are bullish about the equity market for the rest of 2021.

The FOMC is all but certain to formally announce the start of "tapering" at its next meeting in 6 weeks time (2-3 November 2021), i.e., the formal end to monthly purchases of US$120 billion of Treasury and agency securities. The FOMC statement after last week's meeting was about as clear as the FOMC ever is: "Last December, the Committee indicated that it would continue to increase its holdings of Treasury securities by at least $80 billion per month and of agency mortgage‑backed securities by at least $40 billion per month until substantial further progress has been made toward its maximum employment and price stability goals. Since then, the economy has made progress toward these goals. If progress continues broadly as expected, the Committee judges that a moderation in the pace of asset purchases may soon be warranted."In reality, a moderation in the pace of asset purchases (as reflected in the overall size of the monetary base) has already occurred. In the latest 3 months, the US monetary base increased by a cumulative US$88 billion (i.e., far below the US$360 billion of total increase in asset purchases promised for that period).  This enabled M2 growth to decelerate notably -- from 20.6% YoY in March 2021 and 14.6% YoY in April to 12% YoY in July 2021. With US real GDP growing 6.3% QoQ (saar) in 1Q 2021 and 6.6% in 2Q 2021, M2 growth of over 20% YoY (following the previous year's 20%-plus growth rates) was clearly excessive. But with M2 decelerating to 12% YoY growth, the severity of upward pressure on prices has begun to ease somewhat -- and core CPI inflation moderated from 4.5% YoY in June 2021 to 4.3% in July and 4% YoY in August 2021. The further reining-in of the monetary base over the next few months (and a complete end to QE asset purchases no later than mid-2022) should contribute to a smooth transition to decelerating M2 (8% YoY by the turn of the year) and slightly lower inflation rates -- although both core-PCE and core-CPI inflation are likely to remain above 3% YoY for the rest of 2021. A gradual tightening of monetary conditions (already underway for 3 months, but being formalized in the period ahead) will steadily push bond yields higher and steepen the yield curve. The predictable steepening of the curve will be positive for banks, and the strengthening economic recovery will boost earnings across the economy. We remain wary of the long-term implications of CAPE (Shiller's cyclically-adjusted P/E ratio), which at 38.3x is at its highest since the 2000 peak. But near-term, the conventional P/E ratio will moderate (from 34x currently), so we are bullish about the equity market for the rest of 2021. 

Dow Jones Industrial Average (INDU INDEX)

US: Moving from Stealth to Formal Taper; Bond Yields Will Gently Rise