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, 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

China Has Been the Global Winner from the Liquidity Glut of 2008-21; Now Comes Pain

Diplomacy/ Procreation/ Yuan/ US-China/ Shein

CPTPP Gains Traction: Multilateralism Is (Still) Well and Alive

Labour Market Slack Remains but FOMC Will Need to Tighten by Mid-2021

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

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

Biden's Huge Stimulus Is Obliging the Fed to Edge Away from Unlimited QE

Misguided US Stimulus Offers Little Help to Supply-Side to Offset Potential Inflation Risks

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

Cross Asset Strategy

As we predicted in June 2020, US CPI inflation has jumped at the start of 2Q 2021, the headline rising to 4.2% YoY (a 12-year high) and the core-CPI inflation rate rising to 3% YoY (the highest in 25 years).  Although FOMC members insist inflation is "transitory", there are shortages of chips, ships, and many resources globally. Despite some seeming slack in the US labour market, it is proving difficult to move workers from sectors with surplus labour (eg, hospitality and aviation) to other sectors of the economy, and this friction is contributing to higher inflation. We believe the FOMC will have to cut back on the size of its asset purchases (thereby slowing M2 growth from its currently torrid 21% YoY pace), and will be obliged to raise the Fed Funds rate by 12.5bp by the July FOMC meeting.  Inflation is also rising because the economy is operating near full-capacity after the massive fiscal stimulus (over 10% of GDP) passed by March 2021. President Biden has proposed US$4.1 trillion of additional spending on Infrastructure and Families over the next 8-10 years, to be financed by tax increases (a higher corporate tax rate of 28%, higher personal income tax rates for those with over US$1 million of annual income, and a near-doubling in the capital-gains tax rate for the richest). The tax increases are designed to pay for the increased spending over 15 years, implying that there will an additional fiscal stimulus since the spending will be more front-end-loaded than taxes. This ambitious fiscal agenda, however, is only likely to be partially enacted, given that the Democrats have only 4 seats more than the half-way mark in the House, and exactly half the Senate (implying a big role for Vice President Harris's casting vote). Anything opposed by one of the 3 relatively conservative Democratic Senators (Manchin, Kelly and Sinema) or the Blue Dog coalition of centrist Democrats in the House (numbering 19 members). Truly ambitious spending aimed at creating permanent entitlements (e.g., the "green" and tech-intensive elements of Biden's Infrastructure Plan, and some elements of his Families plan that don't hit at "reparations") could pass with 60 Senate votes (at least 10 Republicans). But the size of the total spending will need to be cut back to about US$1 trillion (out of US$4.1 trillion) with commensurate compromises on taxes (corporate tax of 25%, capital gains tax rate hiked to less than a 30% peak with loopholes). Even using the Budgeting process to pass tax and spending through "reconciliation" (bypassing the need for 60 Senate votes, settling for 51) will have limited utility. While we expect a smaller package to get done, it will be less inflationary than the full Biden package. But inflation will nonetheless remain a factor all through 2021. We recommend being Underweight equities, with the allocation focused on mineral (including gold) companies, steel producers, plantation companies and industrial cyclicals that benefit from growth and inflation.

As we predicted in June 2020, US CPI inflation has jumped at the start of 2Q 2021, the headline rising to 4.2% YoY (a 12-year high) and the core-CPI inflation rate rising to 3% YoY (the highest in 25 years).  Although FOMC members insist inflation is "transitory", there are shortages of chips, ships, and many resources globally. Despite some seeming slack in the US labour market, it is proving difficult to move workers from sectors with surplus labour (eg, hospitality and aviation) to other sectors of the economy, and this friction is contributing to higher inflation. We believe the FOMC will have to cut back on the size of its asset purchases (thereby slowing M2 growth from its currently torrid 21% YoY pace), and will be obliged to raise the Fed Funds rate by 12.5bp by the July FOMC meeting.  Inflation is also rising because the economy is operating near full-capacity after the massive fiscal stimulus (over 10% of GDP) passed by March 2021. President Biden has proposed US$4.1 trillion of additional spending on Infrastructure and Families over the next 8-10 years, to be financed by tax increases (a higher corporate tax rate of 28%, higher personal income tax rates for those with over US$1 million of annual income, and a near-doubling in the capital-gains tax rate for the richest). The tax increases are designed to pay for the increased spending over 15 years, implying that there will an additional fiscal stimulus since the spending will be more front-end-loaded than taxes. This ambitious fiscal agenda, however, is only likely to be partially enacted, given that the Democrats have only 4 seats more than the half-way mark in the House, and exactly half the Senate (implying a big role for Vice President Harris's casting vote). Anything opposed by one of the 3 relatively conservative Democratic Senators (Manchin, Kelly and Sinema) or the Blue Dog coalition of centrist Democrats in the House (numbering 19 members). Truly ambitious spending aimed at creating permanent entitlements (e.g., the "green" and tech-intensive elements of Biden's Infrastructure Plan, and some elements of his Families plan that don't hit at "reparations") could pass with 60 Senate votes (at least 10 Republicans). But the size of the total spending will need to be cut back to about US$1 trillion (out of US$4.1 trillion) with commensurate compromises on taxes (corporate tax of 25%, capital gains tax rate hiked to less than a 30% peak with loopholes). Even using the Budgeting process to pass tax and spending through "reconciliation" (bypassing the need for 60 Senate votes, settling for 51) will have limited utility. While we expect a smaller package to get done, it will be less inflationary than the full Biden package. But inflation will nonetheless remain a factor all through 2021. We recommend being Underweight equities, with the allocation focused on mineral (including gold) companies, steel producers, plantation companies and industrial cyclicals that benefit from growth and inflation. 

Biden's "Socialist" Remake of the US: How Much Will Be Too Much for the Blue Dogs?