Head of Research, Steno Research

Emil Moller

Head of Research

Macro and Geopolitical Research House

Steno Research

Steno Research is a new macro and geopolitical research house. We are based out of Copenhagen, Denmark, but have an international team and a strong network of sources and partners around the world. The team is lead by Andreas Steno, previous global head of strategy at Nordea Bank, and Mikkel Rosenvold, former chief consultant in the Danish Ministry of Finance.

Macroeconomics

<ul><li>The early hikers club comprising e.g. Brazil and Mexico could be a decent steepener trade from here as long as FX vol remains relatively muted</li><li>Receiving rates in Brazil, Poland or India amidst this global bond party makes sense</li><li>As markets have outpaced central banks and vanilla economists in pricing in future rate cuts while eagerly purchasing bonds, the question that arises is how to effectively navigate this transition from a period of rapid buying to an anticipated rate cutting cycle in the emerging markets.</li></ul>

The early hikers club comprising e.g. Brazil and Mexico could be a decent steepener trade from here as long as FX vol remains relatively mutedReceiving rates in Brazil, Poland or India amidst this global bond party makes senseAs markets have outpaced central banks and vanilla economists in pricing in future rate cuts while eagerly purchasing bonds, the question that arises is how to effectively navigate this transition from a period of rapid buying to an anticipated rate cutting cycle in the emerging markets.

EM by EM #33: Early Hikers = Early Steepeners?

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

<ul>
<li>RGDP grew 7.2% in FY2023 driven by 10.4% growth in GFCF and 7.5% growth in PCE. Improved terms of trade will boost net exports, ensuring 7.2% growth in FY2024 too.</li>
<li>Services (over half of GDP) have averaged 8% annual real growth for the past 25 years (8.7% excluding the covid year), underpinning growth. Manufacturing set to gain from relocating supply-chains.</li>
<li>With tax (personal, corporate and GST) revenues growing in double-digits YoY, the fiscal deficit (and PSBR) are undershooting official estimates, helping to crowd-in stronger investment spending. </li>
</ul>


RGDP grew 7.2% in FY2023 driven by 10.4% growth in GFCF and 7.5% growth in PCE. Improved terms of trade will boost net exports, ensuring 7.2% growth in FY2024 too.
Services (over half of GDP) have averaged 8% annual real growth for the past 25 years (8.7% excluding the covid year), underpinning growth. Manufacturing set to gain from relocating supply-chains.
With tax (personal, corporate and GST) revenues growing in double-digits YoY, the fiscal deficit (and PSBR) are undershooting official estimates, helping to crowd-in stronger investment spending. 


India: Net Exports and Investment to Ensure 7%+ RGDP Growth as PSBR Moderates

<ul>
<li>For a second consecutive year, fiscal policy is mildly contractionary while accommodating a 30%+ hike in public investment. Strong tax revenues help lower the fiscal deficit by 0.5% of GDP.</li>
<li>Surging nominal GDP boosted corporate &amp; income tax revenue by 16%YoY+ and central GST revenue by 30%YoY in Apr-Dec'22. Actual FY23 deficit will be 6% (rather than 6.4%) of GDP. </li>
<li>We expect nominal GDP to grow 13% (vs 10.4% official projection) in FY24, cutting fiscal deficit to 5.5% of GDP, thus crowding-in private investment, enabling real GDP to grow 7.2%. </li>
</ul>


For a second consecutive year, fiscal policy is mildly contractionary while accommodating a 30%+ hike in public investment. Strong tax revenues help lower the fiscal deficit by 0.5% of GDP.
Surging nominal GDP boosted corporate &amp; income tax revenue by 16%YoY+ and central GST revenue by 30%YoY in Apr-Dec'22. Actual FY23 deficit will be 6% (rather than 6.4%) of GDP. 
We expect nominal GDP to grow 13% (vs 10.4% official projection) in FY24, cutting fiscal deficit to 5.5% of GDP, thus crowding-in private investment, enabling real GDP to grow 7.2%. 


India: Surging Tax Revenue Helps Lower PSBR, Ensuring Capex-Led Growth

<ul>
<li>India's real policy rate was +0.55% in Dec'22, as CPI inflation receded to 5.72%YoY, within the RBI's 2-6% inflation target for the second consecutive month. No more rate hikes likely. </li>
<li>Industrial output expanded 7.1% YoY in Nov'22, with consumer nondurables output up 8.9%YoY -- tentative sign of a turnaround in consumption after a half-year of sluggishness. Consumer durables rebounded too. </li>
<li>After a stagnant decade, capital goods output expanded 20.7%YoY in Nov'22 (+14.9%YoY in Apr-Nov'22), capital goods imports +15.4%YoY. Rebounding GFCF will ensure 7.5% RGDP growth in FY23, 7.2% in FY24.</li>
</ul>


India's real policy rate was +0.55% in Dec'22, as CPI inflation receded to 5.72%YoY, within the RBI's 2-6% inflation target for the second consecutive month. No more rate hikes likely. 
Industrial output expanded 7.1% YoY in Nov'22, with consumer nondurables output up 8.9%YoY -- tentative sign of a turnaround in consumption after a half-year of sluggishness. Consumer durables rebounded too. 
After a stagnant decade, capital goods output expanded 20.7%YoY in Nov'22 (+14.9%YoY in Apr-Nov'22), capital goods imports +15.4%YoY. Rebounding GFCF will ensure 7.5% RGDP growth in FY23, 7.2% in FY24.


India: Growth on Track Even as Inflation Abates; No More Rate Hikes Likely

<ul>
<li>After 9.7%YoY growth in 1HFY23, we expect real GDP growth of 7.5% for the full FY23, led by investment spending, which is being crowded-in as the fiscal deficit stays contained. </li>
<li>Nominal GDP grew 16.2%YoY in 2QFY23, bolstering government revenue and corporate earnings. The fiscal deficit in Apr-Oct'22 was 45.6% of the FY23 target, having already exceeded budget targets in Apr-Oct'19&amp;'18.</li>
<li>With Brent crude prices falling below US$85/bbl, CPI inflation is likely to be below 6% YoY in Jan-Mar'23. We expect 7.3% real GDP growth in FY24 despite the OECD recession. </li>
</ul>


After 9.7%YoY growth in 1HFY23, we expect real GDP growth of 7.5% for the full FY23, led by investment spending, which is being crowded-in as the fiscal deficit stays contained. 
Nominal GDP grew 16.2%YoY in 2QFY23, bolstering government revenue and corporate earnings. The fiscal deficit in Apr-Oct'22 was 45.6% of the FY23 target, having already exceeded budget targets in Apr-Oct'19&amp;'18.
With Brent crude prices falling below US$85/bbl, CPI inflation is likely to be below 6% YoY in Jan-Mar'23. We expect 7.3% real GDP growth in FY24 despite the OECD recession. 


India: Investment-Led Growth Crowded-In as Government's Fiscal Deficit Is Contained

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EM by EM #33: Early Hikers = Early Steepeners?

Conclusions up front:– The early hikers club comprising e.g. Brazil and Mexico could be a decent steepener trade from here as long as FX vol...

Steno Research

India: Net Exports and Investment to Ensure 7%+ RGDP Growth as PSBR Moderates

RGDP grew 7.2%YoY in FY23, led by 10.4% GFCF growth GFCF and 7.5% PCE growth. In FY24, improving terms of trade will boost domestic demand, while a...

Prasenjit K. Basu

India: Surging Tax Revenue Helps Lower PSBR, Ensuring Capex-Led Growth

CGST revenue up 30%YoY & income taxes 16%YoY in Apr-Dec'22, enabling 33% boost to public investment for FY24 but still lowering the fiscal deficit....

Prasenjit K. Basu

India: Growth on Track Even as Inflation Abates; No More Rate Hikes Likely

Real policy rate of +0.55% ensures no rate hikes are likely this year, as food & energy inflation recede. Rebounding capital goods output & imports...

Prasenjit K. Basu

India: Investment-Led Growth Crowded-In as Government's Fiscal Deficit Is Contained

With the fiscal deficit well-contained, GFCF is being crowded-in -- now 21% higher than the pre-Covid quarter 3 years ago. Lower Brent will allow...

Prasenjit K. Basu

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