2024 Market Outlook



Rethinking the macro landscape

Reframing globalisation

Redefining sustainability

2024 Market Outlook Reframing globalisation

Geopolitical tensions, trade barriers, and the COVID-19 pandemic fallout have triggered changes in international trading patterns and growth prospects. Global trade and capital flows are increasingly influenced by the need for national security and greater resilience. This is resulting in investment opportunities in countries across EMs and Asia.

The World Trade Organisation (WTO) forecasts that trade growth would rebound to 3.3% in 2024, up from 0.8% in 2023. According to WTO, such swings are not unusual given the sensitivity of goods to business cycles and does not spell a permanent decline of world trade. Similarly, WTO suggests that evidence of deglobalisation remains limited. The share of intermediate goods in world trade (an indicator of the extent of supply chains) has only fallen to 48.5% in the first half of 2023 compared to an average of 51% over the past three years.

In Latin America, Mexico, the ‘nearshoring’ leader with geographical advantage to the US, has robust manufacturing capability, ample labour pool and important natural resources (energy, copper, lithium). The rest of Latin America is also rich in lithium and copper which are key materials for electric vehicles and renewable energy. Countries in EMEA (Poland, Hungary, Czech Republic and Turkey) have attractive demographics and competitive manufacturing bases which will benefit from ‘nearshoring’ trends of companies from advanced European economies and multinational companies.

Globalisation is changing, not receding. The change will depend on the alignment of national interests, economic structures, and a country’s natural endowments plus its peoples’ skill sets. We expect the current supply chain shifts and technological developments, in particular artificial intelligence, to drive future globalisation trends. SUPPLY CHAIN TRANSITION WINNERS --------------- Exacerbated by events including the geopolitical conflict between the US and China, COVID-19 and Russia’s invasion of Ukraine, supply chain security and diversification are at the forefront of most companies’ medium-term investment plans. A structural recalibrating of global supply chains away from China and towards other markets is taking place. The beneficiaries of this move are spread across Latin America, EMEA, ASEAN and India. These countries possess cheap labour, have decent manufacturing bases and are producers of important commodities.

ASEAN’s growing share of global Foreign Direct Investments (FDI) suggests that countries in the region are also benefiting from the supply chain shifts. Indonesia’s abundant nickel reserves and Thailand’s strong auto supply chain network make it ideal destinations for the electric vehicle supply chain. Likewise in the semiconductor supply chain, Malaysia has an edge in advanced packaging and testing while Singapore is a wafer fabrication hub. Vietnam’s relevance to the global supply chain is evidenced by the fact that companies such as Samsung, Google, Microsoft, and Apple have shifted portions of their supply chains there as part of their “China plus one” strategies. A fast-growing population and rising middle-income consumers add to the region’s appeal.

ASEAN’s growing share of global Foreign Direct Investments suggests that the region is

benefiting from the supply chain shifts.

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