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Chetan Ahya: latest market views
Morgan Stanley
Summary
Chetan Ahya is Morgan Stanley's Chief Asia Economist, based in Hong Kong, who joined the firm in 2000 and focuses on growth dynamics such as the leverage cycle, demographics and productivity.
Chorus has 8 views from Chetan Ahya across 2 episodes on Thoughts on the Market (Morgan Stanley) since October 22, 2026.
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BOJ will hike only twice, December and March, below the three hikes markets price.
Ahya's house view is that the BOJ hikes twice, in December and again in March next year, against market pricing of three more hikes. The dovish call rests on the source of Japan's inflation. Inflation has been driven mainly by yen weakness and higher commodity prices rather than demand, and real consumption is still about 1% below pre-COVID levels. With no demand-driven overheating, the BOJ will avoid more aggressive tightening.
“We expect the BOJ to hike its policy rate twice first in December and then again in March next year. This compares with market pricing of three more rate hikes. ...Hence, we think BOJ will avoid taking up more aggressive policy tightening.”at 4:41
Thoughts on the Market (Morgan Stanley): One Global Shock, Different Rate Paths ·
Japan's inflation comes from yen weakness and commodities, not demand, as consumption lags.
Japan's inflation has been driven largely by FX weakness and higher commodity prices rather than by demand-side pressure. The evidence is that real consumption is still about 1% below pre-COVID levels, so the economy is not overheating. This is why Ahya thinks the BOJ will not need aggressive tightening.
“we think that Japan's inflation has been largely driven by FX weakness and higher commodity prices and not due to demand side pressures. ...real consumption is still 1% below pre COVID levels.”at 4:53
Thoughts on the Market (Morgan Stanley): One Global Shock, Different Rate Paths ·
Most Asian central banks will hike countercyclically as exports drive growth and US rates rise.
Asia does not have a large inflation problem, but growth is strong because of exports. Core inflation is within most central banks' comfort zones, except in Australia and Korea, so they are not expected to react to inflation directly. As US rates rise and growth stays strong, most Asian central banks will take countercyclical rate hikes in the coming quarters.
“...for most central banks, [we are] expecting them to take up rate hikes. But those will be more counter cyclical in nature. ...most central banks will take up countercyclical rate hikes in the coming quarters.”at 9:46
Thoughts on the Market (Morgan Stanley): One Global Shock, Different Rate Paths ·
Asia's capex upswing, led by tech, is broadening into energy, defense and industrial investment.
Ahya says Asia is benefiting from a strong pickup in capex. It was initially led by the tech sector, but it is now broadening into energy, defense and broader industrial investment. Exports are strong and beginning to broaden from tech goods to non-tech goods. Together these trends support the region's growth despite global shocks.
“Asia is benefiting from a strong pickup in CapEx, which initially was led by the tech sector, but is now broadening out to energy, defense, and broader industrial investments.”at 3:12
Thoughts on the Market (Morgan Stanley): Economic Roundtable: What’s Keeping Global Growth Going? ·
Asia's terms of trade are positive despite oil, as export prices lift profits and tax revenue.
Ahya says the region has a positive terms-of-trade position even though oil prices are higher. Higher export prices have boosted corporate profits, which in turn raised government tax revenues. These revenues offset the fiscal pressure from higher fuel subsidies, so the oil shock is not a fiscal drag for the region.
“This has meant that the region has faced positive terms of trade situation despite higher oil prices. Higher export prices have boosted corporate profits and in turn government tax revenues offsetting the fiscal pressures from higher fuel subsidies.”at 3:31
Thoughts on the Market (Morgan Stanley): Economic Roundtable: What’s Keeping Global Growth Going? ·
Asia's macro buffers are strong: current account surplus is 4.2% of GDP, so higher rates aren't disrupting growth.
Ahya says macro stability indicators in Asia are in good shape, which differs from earlier cycles. Current account surpluses in the region have widened significantly to $1.6 trillion, or 4.2% of GDP. Private sector balance sheets outside China are also healthy. He concludes that higher oil prices and higher interest rates have not disturbed the region's capex and growth cycle.
“Current account surpluses in the region have widened quite significantly. In fact, it is $1,600,000,000,000 or 4.2% of GDP.”at 3:53
Thoughts on the Market (Morgan Stanley): Economic Roundtable: What’s Keeping Global Growth Going? ·
China's consumer remains weak; a K-shaped recovery with deleveraging households and little big stimulus expected.
Ahya describes China's growth as a K-shaped recovery, with strong exports and AI capex on one side and a very weak consumer on the other. Consumption is weak because the property adjustment is incomplete, the labor market and wage growth are weak, and asset prices have fallen sharply. Households are deleveraging quickly, with consumer debt contracting at 1.5%, which is surprising. He thinks policymakers may respond, but he does not expect a big fiscal expansion, so China is unlikely to provide extra global demand.
“I think the short answer to your question is no. We are still very cautious on China's consumption outlook.”at 9:44
Thoughts on the Market (Morgan Stanley): Economic Roundtable: What’s Keeping Global Growth Going? ·
Oil above $130 to $150 would hurt Asia, forcing governments to pass higher prices on to consumers.
Ahya names oil prices as one of Asia's two main risks. He sees a threshold of $130 to $150 per barrel as the level that would be a problem for the region. At that level, governments would finally have to pass higher oil prices on to consumers. He adds that a combination of higher oil prices and a contraction in US AI investment would be a big shock to Asian growth.
“on oil prices, I would say a threshold of $130 to $150 of oil would be a problem for the region.”at 12:41
Thoughts on the Market (Morgan Stanley): Economic Roundtable: What’s Keeping Global Growth Going? ·
Shows
- Thoughts on the Market (Morgan Stanley) · 2 episodes
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