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2015 All-Asia Research Team: Economics, No. 2: Chetan Ahya & team

< The 2015 All-Asia Research TeamChetan Ahya & teamMorgan StanleyFirst-place appearances: 7

Total appearances: 18

Team debut: 1995

Repeating in second place are Chetan Ahya and his seven-member Morgan Stanley squad, whose coverage is “both comprehensive and comprehensible for multiasset investors,” declares one admirer. The 46-year-old crew chief and his cohorts maintain a cautious outlook on the region’s economies, noting that these countries are grappling with a series of challenges on several fronts. For example, regarding demographics, in six of the ten nations they monitor, populations are aging and working-age citizenries are shrinking. At a macro level, moreover, national debt as a ratio of gross domestic product is above 200 percent for six countries in the region and more than 180 percent for two others, which combines to produce a troubling tide of leverage, Ahya says. Save for the Philippines, all of these Asian economies “have had a weakening productivity dynamic since 2010,” he adds, while the threat of declining prices is intensifying and represents a key concern. A little over three years ago, reports Ahya, producer prices turned deflationary in China, and that dynamic has since spread to many of its regional trading partners. The effects of this shift extend beyond the commodities markets to impede companies’ pricing power, he notes, which “puts pressure on corporate revenue growth and therefore impacts returns on investment.” In addition, deflation sustains elevated real interest rates and affects the ability of both corporate borrowers and households to pay down debts. “In our view,” he advises, “the risks of the deflationary pressures transmitting to other parts of the global economy remain high. In China deflation is likely to result in the central bank’s instituting two more rate cuts and targeted tools to bring down interbank rates.” Ahya and his teammates foresee “a combination of fiscal easing and potential relaxation in property policy implementation as policymakers bid to stabilize growth. Elsewhere in the region,” he adds, “we anticipate further rate cuts of differing magnitudes as central banks continue to try and ward off deflationary pressures.”

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