As global supply chains undergo significant shifts, business leaders expect India, Mexico and other key markets to grow in importance for their global supply chains in the future, according to a survey.
Titled New anchors reshaping supply chains: Opportunities for investors, a whitepaper commissioned by Eastspring Investments from PwC Singapore has delved into the impact of supply chain rebalancing and the strategies being adopted by business leaders worldwide.
The study, based on a survey of 150 senior executives across North America, Europe and Asia, focused on sectors such as automotive, electronics manufacturing, and pharmaceuticals and medical equipment.
It revealed a consensus among business leaders on the necessity of rebalancing supply chains, with 47% prioritising it as a key business objective.
Emerging markets: India the safest haven of the BRICS?
According to the research, India, South East Asia, emerging Europe, Mexico and select South American markets are anticipated to ascend in importance within global supply chains, driven by factors such as the manufacturing boom in India.
75% of those surveyed said they believed the potential profit at risk as a result of not rebalancing their supply chains would be higher than the cost of rebalancing. Business leaders estimated that between 19-24% of profits could be at risk in the next ten years, depending on the sector, as a result of failing to rebalance supply chains.
Nonetheless, there’s optimism among business leaders, with 29% identifying lower factor costs and 17% highlighting sustainability benefits as potential gains from supply chain rebalancing.
High costs and lack of capabilities were seen as the biggest roadblocks to supply chain rebalancing. Business leaders said they saw strategic partnerships (79%) and M&As (51%) as the preferred means of rebalancing supply chains.
According to the researchers, while India, Mexico and emerging Europe are anticipated to gain significance in supply chains, their current minimal representation in global and regional equity market indices limits diversification and return opportunities. These indices often favour widely held, larger cap stocks, potentially hindering broader investment strategies.
Bill Maldonado, CEO and interim CIO a Eastspring Investments, commented: “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.”
