Australia
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The global realignment of supply chains is unlocking significant opportunities for emerging markets, particularly in India and Southeast Asia, according to a new whitepaper commissioned by Eastspring Investments and prepared by PwC Singapore. The research highlights how geopolitical shifts and evolving business priorities are fostering a new supply chain landscape, positioning these regions as pivotal players.
The whitepaper, New Anchors Reshaping Supply Chains: Opportunities for Investors, explores the challenges and opportunities that global supply chain shifts present. The survey of 150 senior business leaders from across North America, Europe, and Asia in key sectors such as automotive, electronics manufacturing, and pharmaceuticals revealed that nearly half (47%) of respondents identify the need to rebalance and boost supply chain resilience as a priority. In particular, business leaders expect India to grow in importance for future supply chains, alongside Mexico and markets in South East Asia, Emerging Europe and South America.
According to the survey, South East Asia will benefit most from the rebalancing in the electronics manufacturing sector, while India stands to gain in the electronics manufacturing, and pharmaceuticals and medical equipment sectors.
Furthermore, business leaders indicated that the USA is the most important location in global supply chains and will hold this position in the future. China, despite all the trade tensions, is expected to maintain its position as the second most important location.
“Although the US and China are expected to occupy the top two spots in the foreseeable future, other markets will benefit from this push towards greater supply chain resilience,” the study says. The survey names more competitive costs in other markets as reasons for the shift away from China.
The study further indicates that Japan remains an important supply chain location for automotive OEM assembly and the electronics manufacturing sector. South Korea is predicted to advance in global supply chains in the future.
Investment implications of global supply chain shifts
Eastspring highlights that despite the expectation that India and Southeast Asian markets will grow in importance within supply chains, they only have small weightings in the global and regional equity market indices. As of 26 April 2024, Emerging Markets (EMs) have a 10% weight in the MSCI AC World Index, while ASEAN accounts for only 1%. In the MSCI EM Index, India and ASEAN comprise 13% and 6%, respectively.
“Therefore, investors may want to consider a more focused approach to exploit the alpha potential from the global rebalancing theme,” Bill Maldonado, Chief Executive Officer and Interim Chief Investment Officer at Eastspring, opines.
“Investors will increasingly need to be conscious of the underlying currents in the emerging markets and their potential implications as supply chains rebalance globally. Our investment teams are clear that this rebalancing presents a once-in-a-generation opportunity for emerging markets that have the necessary resources and readiness. This, therefore, offers an exciting opportunity for investors to benefit from what could become a period of high growth at present low valuations,” Maldonado adds.
