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

The US consumer price index (both headline and core) rose at an annualized pace of 10.8% MoM in June 2021. For 2Q (April-June) 2021, the core CPI increased at an annualized pace of 10%, while the headline CPI increased 9.2% (annualized) in 2Q 2021. We had predicted precisely this outcome on 12 June 2020 (13 months ago) in <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> because inflation would rise markedly. While the FOMC has insisted that inflation is transitory, it actually began a stealth tightening in May 2021, engineering a month-on-month decline in the monetary base that month. CPI inflation is currently being under-estimated, because the Housing component is properly updated only half-yearly after a complete national survey of rentals and owners' equivalent rents (OER, the implicit rent that would be paid by homeowners were they to rent rather than own their home). The Case-Shiller 20-city housing price index was up 14.9% YoY in April 2021 (the latest data, released at end-June 2021), and this is bound to enter the CPI and PCE price index in 2H 2021. (Housing is considered an investment, not consumption, so rents and OER are the consumption portion; housing prices are not directly relevant to CPI, the cost of using housing -- rents -- are). Having risen just 2.6% YoY in June 2021, Housing is likely to rise much more sharply in 2H 2021, pushing up headline and core CPI (and also PCE, but less because of its lower weight). The labour market retains some sectoral slack in the hospitality and tourism-related sectors, but appropriately skilled labour is increasingly in short supply elsewhere in the economy.  Despite a high base from June 2020 (5% YoY), average weekly earnings (wages) were up 3.6% YoY in June 2021. Wage inflation will likely exceed 4% YoY in 3Q 2021, contributing additionally to inflationary pressure. St. Louis Fed President James Bullard (a non-voting member of the FOMC this year) has already called for tapering to begin (as "substantial progress" has already been made on the Fed's inflation and unemployment goals). While Fed Chair Powell insisted in his House testimony this week that tapering remains "a ways off", he told the Senate on the following day, "...of course we're not comfortable with" the fact that the reopening of the economy had "driven inflation well above 2%". The 27-28 July FOMC meeting will likely see more intense discussion of tapering, and we think formal (not merely stealth) tapering will be begin no later than the September meeting. We remain cautious about equities, although the strong recovery makes cyclicals and consumer cyclicals attractive.

The US consumer price index (both headline and core) rose at an annualized pace of 10.8% MoM in June 2021. For 2Q (April-June) 2021, the core CPI increased at an annualized pace of 10%, while the headline CPI increased 9.2% (annualized) in 2Q 2021. We had predicted precisely this outcome on 12 June 2020 (13 months ago) in Labour Market Slack Remains but FOMC Will Need to Tighten by Mid-2021 because inflation would rise markedly. While the FOMC has insisted that inflation is transitory, it actually began a stealth tightening in May 2021, engineering a month-on-month decline in the monetary base that month. CPI inflation is currently being under-estimated, because the Housing component is properly updated only half-yearly after a complete national survey of rentals and owners' equivalent rents (OER, the implicit rent that would be paid by homeowners were they to rent rather than own their home). The Case-Shiller 20-city housing price index was up 14.9% YoY in April 2021 (the latest data, released at end-June 2021), and this is bound to enter the CPI and PCE price index in 2H 2021. (Housing is considered an investment, not consumption, so rents and OER are the consumption portion; housing prices are not directly relevant to CPI, the cost of using housing -- rents -- are). Having risen just 2.6% YoY in June 2021, Housing is likely to rise much more sharply in 2H 2021, pushing up headline and core CPI (and also PCE, but less because of its lower weight). The labour market retains some sectoral slack in the hospitality and tourism-related sectors, but appropriately skilled labour is increasingly in short supply elsewhere in the economy.  Despite a high base from June 2020 (5% YoY), average weekly earnings (wages) were up 3.6% YoY in June 2021. Wage inflation will likely exceed 4% YoY in 3Q 2021, contributing additionally to inflationary pressure. St. Louis Fed President James Bullard (a non-voting member of the FOMC this year) has already called for tapering to begin (as "substantial progress" has already been made on the Fed's inflation and unemployment goals). While Fed Chair Powell insisted in his House testimony this week that tapering remains "a ways off", he told the Senate on the following day, "...of course we're not comfortable with" the fact that the reopening of the economy had "driven inflation well above 2%". The 27-28 July FOMC meeting will likely see more intense discussion of tapering, and we think formal (not merely stealth) tapering will be begin no later than the September meeting. We remain cautious about equities, although the strong recovery makes cyclicals and consumer cyclicals attractive. 

US Wages Are Resurgent, Even if Markets Haven't Noticed; Keep Your Eye on Inflation

With the US economy growing 6.4%QoQsaar in 1Q 2021,  the output gap has narrowed to just 2.1% below its potential growth path. Headline inflation is already at 2.6% YoY, and likely to exceed 3% in 2Q 2021. While the FOMC reiterated its determination to keep adding US$120 billion to its balance sheet every month, it will be impossible for it to stick to this commitment in the face of a soaring economy and roaring labour market. Expect monetary tightening surprises ahead!

With the US economy growing 6.4%QoQsaar in 1Q 2021,  the output gap has narrowed to just 2.1% below its potential growth path. Headline inflation is already at 2.6% YoY, and likely to exceed 3% in 2Q 2021. While the FOMC reiterated its determination to keep adding US$120 billion to its balance sheet every month, it will be impossible for it to stick to this commitment in the face of a soaring economy and roaring labour market. Expect monetary tightening surprises ahead! 

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

Derivatives and Quantitative Strategist

Gaudenz Schneider

Equity Derivatives

Nasdaq-100 Stock Index / Equity Derivatives

<ul>
<li>
Context: The <a href="https://www.smartkarma.com/entities/chicago-board-options-exchange-volatility-index" target="_blank" data-smartkarma-citation="entities:31501:1" rel="noopener">VIX</a> / <a href="https://www.smartkarma.com/entities/cboe-nasdaq-100-volatility-index" target="_blank" data-smartkarma-citation="entities:49404:1" rel="noopener">VXN</a> ratio has reached a two-sigma extreme, with Nasdaq-100 implied volatility trading at a historically wide premium to S&amp;P 500 volatility despite a rising market backdrop.</li>
<li>
What the dislocation signals: The widening VXN premium points to materially higher uncertainty in the tech- and AI-heavy Nasdaq-100, with implications for hedging costs, relative valuation, and tech/AI risk premia.</li>
<li>
Key event risk — SpaceX IPO: The <a href="https://www.smartkarma.com/entities/space-exploration-technologies-corp-spacex" target="_blank" data-smartkarma-citation="entities:33284:1" rel="noopener">SpaceX (SPCX)</a>   IPO, with potential <a href="https://www.smartkarma.com/entities/nasdaq-100-stock-index" target="_blank" data-smartkarma-citation="entities:26197:1" rel="noopener">Nasdaq-100 (NDX)</a> inclusion, could sustain or widen the <a href="https://www.smartkarma.com/entities/cboe-nasdaq-100-volatility-index" target="_blank" data-smartkarma-citation="entities:49404:1" rel="noopener">CBOE NASDAQ-100 Volatility (VXN)</a> premium.</li>
</ul>



Context: The VIX / VXN ratio has reached a two-sigma extreme, with Nasdaq-100 implied volatility trading at a historically wide premium to S&amp;P 500 volatility despite a rising market backdrop.

What the dislocation signals: The widening VXN premium points to materially higher uncertainty in the tech- and AI-heavy Nasdaq-100, with implications for hedging costs, relative valuation, and tech/AI risk premia.

Key event risk — SpaceX IPO: The SpaceX (SPCX)   IPO, with potential Nasdaq-100 (NDX) inclusion, could sustain or widen the CBOE NASDAQ-100 Volatility (VXN) premium.


Nasdaq-100 Vol Premium Hits Two-Sigma Extreme Vs VIX

Equity/Index & Cross Asset Volatility Specialist, Cameron Design

Jay Cameron

Equity/Index & Cross Asset Volatility Specialist

Cameron Design

We specialize in financial products and volatility. Our strategies balance speed, data, and risk control to capture opportunities across global markets. Our research leverages AI and data analytics to continuously refine our algorithms and adapt to evolving market dynamics.

<ul>
<li>The NFP jump from 88,000 expectations startled markets, causing a selloff in some top performers for the year, and a selloff in the S&amp;P, and global markets.</li>
<li>We suggest evaluating if a secondary selloff is possible, and looking to the derivatives market for possible solutions.</li>
<li>FOMC will need to add the wider payrolls trend to the list of high priority topics at next week's meeting. </li>
</ul>


The NFP jump from 88,000 expectations startled markets, causing a selloff in some top performers for the year, and a selloff in the S&amp;P, and global markets.
We suggest evaluating if a secondary selloff is possible, and looking to the derivatives market for possible solutions.
FOMC will need to add the wider payrolls trend to the list of high priority topics at next week's meeting. 


Hedging the NFP Shock: Tech Selloffs, Fed Hike Risks, and the VIX SEP26 Option Spread

Podcast by J.P. Morgan analysts on global markets, At Any Rate

At Any Rate

Podcast by J.P. Morgan analysts on global markets

Analysts from J.P. Morgan’s Research team take a closer look at the stories behind some of the biggest trends, themes and developments in markets today.

Credit

iShares J.P. Morgan USD Emerging Markets Bond ETF / Credit

iShares J.P. Morgan USD Emerging Markets Bond ETF (EMB US)

iShares J.P. Morgan USD Emerging Markets Bond ETF

<ul><li>US expressing interest in owning Greenland was unexpected but EM assets remained unreactive to the headlines</li><li>Markets have learned not to overreact to geopolitical noise and are more focused on global macro environment</li><li>EM currencies have been structurally bullish but tactical adjustments have been made due to technical factors and potential over positioning.</li></ul>This content is sourced through publicly available sources and has been machine generated. Information displayed is for general informational purposes only.

US expressing interest in owning Greenland was unexpected but EM assets remained unreactive to the headlinesMarkets have learned not to overreact to geopolitical noise and are more focused on global macro environmentEM currencies have been structurally bullish but tactical adjustments have been made due to technical factors and potential over positioning.This content is sourced through publicly available sources and has been machine generated. Information displayed is for general informational purposes only.

EM Fixed Income: A technical signal amid all the noise

United States

The VIX Index is a financial benchmark designed to be an up-to-the-minute market estimate of the expected volatility of the S&P 500® Index, and is calculated by using the midpoint of real-time S&P 500 Index (SPX) option bid/ask quotes.

Chicago Board Options Exchange Volatility Index (VIX INDEX)

Chicago Board Options Exchange Volatility Index

Chicago Board Options Exchange Volatility Index (VIX INDEX)

US Wages Are Resurgent, Even if Markets Haven't Noticed; Keep Your Eye on Inflation

Core CPI rose 10% annualized in 2Q2021; rentals will reflect surging house prices in 2H 2021. Wage inflation in June was 3.6%YoY on a high base....

Prasenjit K. Basu

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

Monetary tightening surprises are ahead, given that PCE is growing over 10% and real GDP 6.4%. The roaring labour market will make it impossible...

Prasenjit K. Basu

Nasdaq-100 Vol Premium Hits Two-Sigma Extreme Vs VIX

Nasdaq-100 implied volatility trades at a historically wide premium to S&P 500 volatility, signalling higher Tech/AI risk pricing. The SpaceX IPO...

Gaudenz Schneider

Hedging the NFP Shock: Tech Selloffs, Fed Hike Risks, and the VIX SEP26 Option Spread

Good data can signal less than good expectations. This insight examines the US move last Friday and suggest what to watch for to be ready for the...

Jay Cameron

EM Fixed Income: A technical signal amid all the noise

The US expressing interest in owning Greenland causes initial market volatility, but emerging market assets remain resilient due to positive global...

At Any Rate