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

US 10yr Yield Pressing on Breakout Resistance

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Delayed Inflation Risks to Be Re-Ignited by Biden Stimulus as Output Gap Closes

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

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

India's 2020 Reforms Will Usher in a Decade of Spectacular Growth from 2021 On

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 steepening yield curve reinforces our view that the US$900 billion stimulus enacted at end-2020 will largely close the US output gap in the current quarter. The new Biden stimulus of US$1.9 trillion (pushing this year's fiscal deficit to a post-WWII record of 20% of GDP) will render further monetary stimulus superfluous. The Fed will be obliged to rein in QE in 2Q 2021, and actual raise the Fed Funds rate no later than its July 2021 meeting. We are bearish equities on a 6-month view, and bullish the US dollar. We reiterate our view articulated in December 2020 (<a href="https://www.smartkarma.com/insights/2021-to-mark-the-return-of-inflation-fed-hike-by-mid-year-implies-risk-off-by-2q-21" target="_blank" data-smartkarma-citation="insights:46348" rel="noopener">2021 to Mark the Return of Inflation: Fed Hike by Mid-Year Implies Risk-Off by 2Q/21  </a>elaborating on our June 2020 view <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> ) that US core PCE inflation will begin to tick up toward 2% YoY by mid-2021, obliging the Fed to cut back on the size of QE, reducing its monthly purchases from the US$120 billion that it has promised. In January 2021, US base money grew by US$41 billion (much less than the promised figure), but this sufficed to boost M2 by 25.5% YoY: we observe that 24% YoY M2 growth (more than double the peak pace of M2 growth in 2009) has become an implicit target while core inflation is subdued and labour-market slack remains.The US output gap didn't close as much as expected in 4Q 2020 because of the spurt in Covid-19 infections, but the likely passage of Biden's US$1.9 trillion stimulus package (on top of the US$900 billion package enacted at the end of 2020) will cause the fiscal deficit to hit a record 20% of GDP in FY2021. The previous stimulus is likely to largely close the output gap in the current quarter (with real GDP likely to be only about 1% below its potential) based on the December 2020 stimulus. A further massive fiscal stimulus will make the Fed's QE superfluous.Inflationary expectations (as reflected in the 5-year TIPS/Treasury breakeven rate) are already for average inflation of 2.4% over the next 5 years. When a further fiscal stimulus pushes this year's fiscal deficit to a record 20% of GDP, core PCE inflation will quickly print above 2% YoY, obliging the Fed to cut back on its promised monthly QE during 2Q 2021, and to actually raise the Fed Funds rate by its July 2021 FOMC meeting.

The steepening yield curve reinforces our view that the US$900 billion stimulus enacted at end-2020 will largely close the US output gap in the current quarter. The new Biden stimulus of US$1.9 trillion (pushing this year's fiscal deficit to a post-WWII record of 20% of GDP) will render further monetary stimulus superfluous. The Fed will be obliged to rein in QE in 2Q 2021, and actual raise the Fed Funds rate no later than its July 2021 meeting. We are bearish equities on a 6-month view, and bullish the US dollar. We reiterate our view articulated in December 2020 (2021 to Mark the Return of Inflation: Fed Hike by Mid-Year Implies Risk-Off by 2Q/21  elaborating on our June 2020 view Labour Market Slack Remains but FOMC Will Need to Tighten by Mid-2021 ) that US core PCE inflation will begin to tick up toward 2% YoY by mid-2021, obliging the Fed to cut back on the size of QE, reducing its monthly purchases from the US$120 billion that it has promised. In January 2021, US base money grew by US$41 billion (much less than the promised figure), but this sufficed to boost M2 by 25.5% YoY: we observe that 24% YoY M2 growth (more than double the peak pace of M2 growth in 2009) has become an implicit target while core inflation is subdued and labour-market slack remains.The US output gap didn't close as much as expected in 4Q 2020 because of the spurt in Covid-19 infections, but the likely passage of Biden's US$1.9 trillion stimulus package (on top of the US$900 billion package enacted at the end of 2020) will cause the fiscal deficit to hit a record 20% of GDP in FY2021. The previous stimulus is likely to largely close the output gap in the current quarter (with real GDP likely to be only about 1% below its potential) based on the December 2020 stimulus. A further massive fiscal stimulus will make the Fed's QE superfluous.Inflationary expectations (as reflected in the 5-year TIPS/Treasury breakeven rate) are already for average inflation of 2.4% over the next 5 years. When a further fiscal stimulus pushes this year's fiscal deficit to a record 20% of GDP, core PCE inflation will quickly print above 2% YoY, obliging the Fed to cut back on its promised monthly QE during 2Q 2021, and to actually raise the Fed Funds rate by its July 2021 FOMC meeting. 

Dow Jones Industrial Average (INDU INDEX)

US: Steepening Yield Curve Is a Harbinger of Inflation That'll Oblige Fed to Tighten