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

<ul>
<li>Unlike the consensus, we weren't surprised by the 8.2%YoY real GDP growth in Jul-Sep'25, as the sharp moderation in inflation dampened the GDP deflator too. </li>
<li>We retain our forecast of 9%YoY growth in Oct'25-Sep'26, led by stronger PCE after the cut in GST rates and likely boost to farm incomes from the strong monsoon-fed crop. </li>
<li>With CPI inflation far below the 2-6% RBI target, policy rates will need to steadily decline, boosting GFCF. We expect 8.5% RGDP growth in FY26, and 8.2% in FY27. </li>
</ul>


Unlike the consensus, we weren't surprised by the 8.2%YoY real GDP growth in Jul-Sep'25, as the sharp moderation in inflation dampened the GDP deflator too. 
We retain our forecast of 9%YoY growth in Oct'25-Sep'26, led by stronger PCE after the cut in GST rates and likely boost to farm incomes from the strong monsoon-fed crop. 
With CPI inflation far below the 2-6% RBI target, policy rates will need to steadily decline, boosting GFCF. We expect 8.5% RGDP growth in FY26, and 8.2% in FY27. 


India: 8.2%YoY Growth in Q2FY26; to Accelerate to 9%YoY in Oct'25-Sep'26

<ul>
<li>China has 'won' the first phase of the trade war, with exports up 5%YoY and imports down 1%YoY in Jan-Oct'25 despite an appreciating RMB and high US tariffs (now stabilised). </li>
<li>FAI has declined YoY since Jun'25, declining 12.5%YoY in Oct'25, and severe PPI deflation has persisted for 37 months. Declining imports widened the 12m rolling-sum trade surplus to US$1.17trn. </li>
<li>Stagnant FX reserves show net capital and service/income outflows of US$825bn in Jan-Oct'25. Domestic vulnerabilities, however, are being papered over by the trade truce with the US. Bullish for China.</li>
</ul>


China has 'won' the first phase of the trade war, with exports up 5%YoY and imports down 1%YoY in Jan-Oct'25 despite an appreciating RMB and high US tariffs (now stabilised). 
FAI has declined YoY since Jun'25, declining 12.5%YoY in Oct'25, and severe PPI deflation has persisted for 37 months. Declining imports widened the 12m rolling-sum trade surplus to US$1.17trn. 
Stagnant FX reserves show net capital and service/income outflows of US$825bn in Jan-Oct'25. Domestic vulnerabilities, however, are being papered over by the trade truce with the US. Bullish for China.


China: Winning the Trade War While Still Imploding Domestically

<ul>
<li>A divided FOMC cut by 25bp as expected, but Powell signalled Dec'25 cut was far from a foregone conclusion; instead the FOMC was strongly committed to returning to 2% inflation. </li>
<li>US$88.8bn decline in base money (Mar-Aug'25) has held M2 and inflation in check. The end of QT from Dec'25 will be a form of easing, precluding rate cuts until Jan'26. </li>
<li>FOMC voting shows doves isolated, and Powell-led FOMC will stay hawkish until Jan'26, especially amid fogginess on inflation data. The next rate cut is unlikely until Mar'26. </li>
</ul>


A divided FOMC cut by 25bp as expected, but Powell signalled Dec'25 cut was far from a foregone conclusion; instead the FOMC was strongly committed to returning to 2% inflation. 
US$88.8bn decline in base money (Mar-Aug'25) has held M2 and inflation in check. The end of QT from Dec'25 will be a form of easing, precluding rate cuts until Jan'26. 
FOMC voting shows doves isolated, and Powell-led FOMC will stay hawkish until Jan'26, especially amid fogginess on inflation data. The next rate cut is unlikely until Mar'26. 


US: No More Rate Cuts Likely from the Powell Fed; More Dovish FOMC by Q2 2026

<ul>
<li>CPI inflation edged up to 3%YoY in Sep'25, after a 0.3%MoM increase. Markets cheered, as these were lower than expectations, but MoM-annualized inflation is running well above the 2% target. </li>
<li>The Powell Fed's politically-driven 75bp of rate cuts in Sep-Nov'24 are now obliging it to effectively move to a 3%YoY inflation target; a 25bp rate cut is inevitable next week. </li>
<li>Base money contracted US$88.8bn in Mar-Aug'25, so M2 growth was modest (4.8%YoY). But the rise in crude prices (post-Russian sanctions) will raise inflation past 3%, precluding any Dec'25 rate cut. </li>
</ul>


CPI inflation edged up to 3%YoY in Sep'25, after a 0.3%MoM increase. Markets cheered, as these were lower than expectations, but MoM-annualized inflation is running well above the 2% target. 
The Powell Fed's politically-driven 75bp of rate cuts in Sep-Nov'24 are now obliging it to effectively move to a 3%YoY inflation target; a 25bp rate cut is inevitable next week. 
Base money contracted US$88.8bn in Mar-Aug'25, so M2 growth was modest (4.8%YoY). But the rise in crude prices (post-Russian sanctions) will raise inflation past 3%, precluding any Dec'25 rate cut. 


US: Inflation Edges Up, but Previous Policy Errors Must Be Atoned with Rate Cut Now

<ul>
<li>China's trade surplus soared to US$1.17trn in the 12 months to Aug'25. Yet FX reserves, despite mild monthly improvements, are flat relative to Sep'24, implying continued massive capital flight. </li>
<li>FAI for Jan-Aug'25 rose 0.5%YoY (vs 1.6%YoY for Jan-Jul'25), implying FAI declined 7.2%YoY in Aug'25. Even non-property FAI declined 3.5%YoY in Aug'25, while property FAI declined 19.1%YoY that month.  </li>
<li>Persistent PPI deflation (35 consecutive months) has caused CPI deflation for 5 of the last 8 months. As re-exports via Mexico/ASEAN become costlier, China's real GDP will grow &lt;3%YoY Oct'25-Jun'26.</li>
</ul>


China's trade surplus soared to US$1.17trn in the 12 months to Aug'25. Yet FX reserves, despite mild monthly improvements, are flat relative to Sep'24, implying continued massive capital flight. 
FAI for Jan-Aug'25 rose 0.5%YoY (vs 1.6%YoY for Jan-Jul'25), implying FAI declined 7.2%YoY in Aug'25. Even non-property FAI declined 3.5%YoY in Aug'25, while property FAI declined 19.1%YoY that month.  
Persistent PPI deflation (35 consecutive months) has caused CPI deflation for 5 of the last 8 months. As re-exports via Mexico/ASEAN become costlier, China's real GDP will grow &lt;3%YoY Oct'25-Jun'26.


China: Still on the Edge of a Financial Precipice, Kept Afloat by US Distraction

PK Basu has 35 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 and Asia sector strategist 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.