Advisor Flipbooks

10 INVESTMENT THEMES FOR 2023 · 7 Winnie Kwan is an equity portfolio manager with 26 years of experience. She is a manager for New World Fund®. Challenged by supply chain disruptions during the pandemic, many companies are taking steps to diversify their manufacturing operations — placing a renewed focus on reliability and security over cost and effi ciency. Rising geopolitical tensions, underscored by the war in Ukraine, have made this shift in corporate strategy all the more urgent, transforming global trade in the process. There's a common misconception that this trend will displace China as the world's largest manufacturing base. Rather, many companies are shifting to a "China +1 strategy" by maintaining operations in the country while adding facilities elsewhere. Incremental investments in China will focus primarily on the domestic market, while additional investments in other locations will serve the rest of the world. Southeast Asia, Mexico, India and the United States are some of the top relocation destinations. Companies that facilitate this transition — like Japanese automation enablers or REITs in India — may be well positioned to take advantage of this trend. It could take a decade for companies to fully transition, but the process is certainly underway. I believe it will be one of the more important investment themes of the 2020s. 6. Reshoring supply chains Source: AmCham Shanghai 2021 China Business Report, published September 22, 2021. Based on a survey of 338 foreign companies doing business in China. Of those companies, 63 said they were redirecting investments from China to other locations, including Southeast Asia, Mexico, India and the United States, among others. Survey respondents could provide multiple responses, so total does not add up to 100%. Southeast Asia is well positioned for the rewiring of global supply chains Top destinations for companies redirecting investments from China China 50.8% Southeast Asia 34.9% Mexico 30.2% India 22.2% United States

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