“There are powerful changes happening in the global economy. Mounting geopolitical tensions bring risks for companies. The threat of higher tariffs, and – at the extremes – sanctions, could create potential disruption to companies’ supply chains and distribution networks. To that effort, many companies have been reorganising their supply chains to adjust to this new reality. We believe a number of the world’s smaller emerging markets could be beneficiaries.” That’s the insight from Sudaif Niaz, Co-Manger of the BlackRock Frontiers Investment Trust, as he tells us in the following analysis:
Capital at risk. The value of investments and the income from them can fall as well as rise and are not guaranteed. Investors may not get back the amount originally invested.
The disruption of the pandemic, trade wars and military conflict have forced companies to look again at how and where they source materials. This is particularly acute in areas such as the raw materials needed for the energy transition, where a lot of countries are competing for the same resources[1].
Supply chains are being re-routed, and trading relationships redrawn. Data from McKinsey shows that companies are increasingly moving from a ‘just-in-time’ model to a ‘just-in-case’ model. This means looking to prioritise stability and reliability, over speed and efficiency[2]. Part of this phenomenon is ‘near-shoring’, bringing manufacturing closer to home. McKinsey says the number of companies taking action to bring production closer to home has doubled over the past 12 months[3].
Large trading nations look to emerging markets
As geopolitical tensions rise, we believe that neutral countries could stand to benefit. In this context, ‘neutral’ means being neither part of the Western bloc led by the US, or the Eastern bloc led by China and Russia. Increasingly, larger trading nations are looking to the cheap, skilled labour forces and abundant natural resources of the world’s smaller economies as a less complex and more reliable way to source the products and services they need[4]. We believe this can create opportunities across a number of frontier markets.
For instance, Apple, which previously concentrated much of its manufacturing in China, is now diversifying its operations to include other locations such as Vietnam. Apple has already spent almost $16 billion in the country through its supply chain since 2019[5], creating more than 200,000 jobs. Similar trends are also observed in Thailand, Malaysia and Indonesia[6].
This trend also extends to the sourcing of raw materials. The energy transition happening across the globe as countries move to low carbon fuels is resource-intensive. Western nations in particular, may prefer to trade more with countries that have taken a neutral political stance in response to increasing geopolitical tension. This has helped demand for copper from Chile, nickel from Indonesia, metals from Kazakhstan.
How emerging markets are benefiting from shifting trading patterns
Why do these shifting trading patterns matter for smaller emerging markets? They are a powerful means to change a country’s economic fortunes, we believe. International companies setting up manufacturing plants create jobs, which puts money in people’s pockets, which supports the growth of a consumer economy. This is where investment opportunities can start to flourish.
Banks also play a crucial role in economic development, especially as financial inclusion expands and the demand for business funding increases. The growth of online commerce is closely linked to the spread of mobile telephony, while technology services are essential to support digitization. Together, these factors can drive long-term capital growth for our investors.
In this way, a small initiative—such as an international company establishing operations in an emerging market—can have a transformative impact. It can stimulate self-sustaining domestic growth and create new investment opportunities. It is this capacity for change that makes frontier markets such an exciting place to invest.
For more information on this Trust and how to access the potential opportunities please visit: www.blackrock.com/uk/brfi.
[1] Deloitte – Global trade and the new geoeconomic reality – 15 May 2024
[2] IMD – Why supply chain reorganisation now tops the CEO’s agenda – 25 April 2024
[3] McKinsey – Tech and regionalization bolster supply chains, but complacency looms – 3 November 2023
[4] Economist Impact – The Role of Neutral Countries in Global Trade – June 2024
[5] CNN – ‘Perfect landing spot.’ Apple plans to spend more in Vietnam as it looks beyond China – 18 April 2024
[6] The Star – Opportunities and challenges of China Plus One – 15 April 2024
Why Frontier markets have such a big role to play in global trends
Sudaif Niaz, Co-Manger of the BlackRock Frontiers Investment Trust:
“There are powerful changes happening in the global economy. Mounting geopolitical tensions bring risks for companies. The threat of higher tariffs, and – at the extremes – sanctions, could create potential disruption to companies’ supply chains and distribution networks. To that effort, many companies have been reorganising their supply chains to adjust to this new reality. We believe a number of the world’s smaller emerging markets could be beneficiaries.”
Capital at risk. The value of investments and the income from them can fall as well as rise and are not guaranteed. Investors may not get back the amount originally invested.
The disruption of the pandemic, trade wars and military conflict have forced companies to look again at how and where they source materials. This is particularly acute in areas such as the raw materials needed for the energy transition, where a lot of countries are competing for the same resources[1].
Supply chains are being re-routed, and trading relationships redrawn. Data from McKinsey shows that companies are increasingly moving from a ‘just-in-time’ model to a ‘just-in-case’ model. This means looking to prioritise stability and reliability, over speed and efficiency[2]. Part of this phenomenon is ‘near-shoring’, bringing manufacturing closer to home. McKinsey says the number of companies taking action to bring production closer to home has doubled over the past 12 months[3].
Large trading nations look to emerging markets
As geopolitical tensions rise, we believe that neutral countries could stand to benefit. In this context, ‘neutral’ means being neither part of the Western bloc led by the US, or the Eastern bloc led by China and Russia. Increasingly, larger trading nations are looking to the cheap, skilled labour forces and abundant natural resources of the world’s smaller economies as a less complex and more reliable way to source the products and services they need[4]. We believe this can create opportunities across a number of frontier markets.
For instance, Apple, which previously concentrated much of its manufacturing in China, is now diversifying its operations to include other locations such as Vietnam. Apple has already spent almost $16 billion in the country through its supply chain since 2019[5], creating more than 200,000 jobs. Similar trends are also observed in Thailand, Malaysia and Indonesia[6].
This trend also extends to the sourcing of raw materials. The energy transition happening across the globe as countries move to low carbon fuels is resource-intensive. Western nations in particular, may prefer to trade more with countries that have taken a neutral political stance in response to increasing geopolitical tension. This has helped demand for copper from Chile, nickel from Indonesia, metals from Kazakhstan.
How emerging markets are benefiting from shifting trading patterns
Why do these shifting trading patterns matter for smaller emerging markets? They are a powerful means to change a country’s economic fortunes, we believe. International companies setting up manufacturing plants create jobs, which puts money in people’s pockets, which supports the growth of a consumer economy. This is where investment opportunities can start to flourish.
Banks also play a crucial role in economic development, especially as financial inclusion expands and the demand for business funding increases. The growth of online commerce is closely linked to the spread of mobile telephony, while technology services are essential to support digitization. Together, these factors can drive long-term capital growth for our investors.
In this way, a small initiative—such as an international company establishing operations in an emerging market—can have a transformative impact. It can stimulate self-sustaining domestic growth and create new investment opportunities. It is this capacity for change that makes frontier markets such an exciting place to invest.
For more information on this Trust and how to access the potential opportunities please visit: www.blackrock.com/uk/brfi.
[1] Deloitte – Global trade and the new geoeconomic reality – 15 May 2024
[2] IMD – Why supply chain reorganisation now tops the CEO’s agenda – 25 April 2024
[3] McKinsey – Tech and regionalization bolster supply chains, but complacency looms – 3 November 2023
[4] Economist Impact – The Role of Neutral Countries in Global Trade – June 2024
[5] CNN – ‘Perfect landing spot.’ Apple plans to spend more in Vietnam as it looks beyond China – 18 April 2024
[6] The Star – Opportunities and challenges of China Plus One – 15 April 2024
Sudaif Niaz, Co-Manger of the BlackRock Frontiers Investment Trust:
“There are powerful changes happening in the global economy. Mounting geopolitical tensions bring risks for companies. The threat of higher tariffs, and – at the extremes – sanctions, could create potential disruption to companies’ supply chains and distribution networks. To that effort, many companies have been reorganising their supply chains to adjust to this new reality. We believe a number of the world’s smaller emerging markets could be beneficiaries.”
Capital at risk. The value of investments and the income from them can fall as well as rise and are not guaranteed. Investors may not get back the amount originally invested.
The disruption of the pandemic, trade wars and military conflict have forced companies to look again at how and where they source materials. This is particularly acute in areas such as the raw materials needed for the energy transition, where a lot of countries are competing for the same resources[1].
Supply chains are being re-routed, and trading relationships redrawn. Data from McKinsey shows that companies are increasingly moving from a ‘just-in-time’ model to a ‘just-in-case’ model. This means looking to prioritise stability and reliability, over speed and efficiency[2]. Part of this phenomenon is ‘near-shoring’, bringing manufacturing closer to home. McKinsey says the number of companies taking action to bring production closer to home has doubled over the past 12 months[3].
Large trading nations look to emerging markets
As geopolitical tensions rise, we believe that neutral countries could stand to benefit. In this context, ‘neutral’ means being neither part of the Western bloc led by the US, or the Eastern bloc led by China and Russia. Increasingly, larger trading nations are looking to the cheap, skilled labour forces and abundant natural resources of the world’s smaller economies as a less complex and more reliable way to source the products and services they need[4]. We believe this can create opportunities across a number of frontier markets.
For instance, Apple, which previously concentrated much of its manufacturing in China, is now diversifying its operations to include other locations such as Vietnam. Apple has already spent almost $16 billion in the country through its supply chain since 2019[5], creating more than 200,000 jobs. Similar trends are also observed in Thailand, Malaysia and Indonesia[6].
This trend also extends to the sourcing of raw materials. The energy transition happening across the globe as countries move to low carbon fuels is resource-intensive. Western nations in particular, may prefer to trade more with countries that have taken a neutral political stance in response to increasing geopolitical tension. This has helped demand for copper from Chile, nickel from Indonesia, metals from Kazakhstan.
How emerging markets are benefiting from shifting trading patterns
Why do these shifting trading patterns matter for smaller emerging markets? They are a powerful means to change a country’s economic fortunes, we believe. International companies setting up manufacturing plants create jobs, which puts money in people’s pockets, which supports the growth of a consumer economy. This is where investment opportunities can start to flourish.
Banks also play a crucial role in economic development, especially as financial inclusion expands and the demand for business funding increases. The growth of online commerce is closely linked to the spread of mobile telephony, while technology services are essential to support digitization. Together, these factors can drive long-term capital growth for our investors.
In this way, a small initiative—such as an international company establishing operations in an emerging market—can have a transformative impact. It can stimulate self-sustaining domestic growth and create new investment opportunities. It is this capacity for change that makes frontier markets such an exciting place to invest.
For more information on this Trust and how to access the potential opportunities please visit: www.blackrock.com/uk/brfi.
[1] Deloitte – Global trade and the new geoeconomic reality – 15 May 2024
[2] IMD – Why supply chain reorganisation now tops the CEO’s agenda – 25 April 2024
[3] McKinsey – Tech and regionalization bolster supply chains, but complacency looms – 3 November 2023
[4] Economist Impact – The Role of Neutral Countries in Global Trade – June 2024
[5] CNN – ‘Perfect landing spot.’ Apple plans to spend more in Vietnam as it looks beyond China – 18 April 2024
[6] The Star – Opportunities and challenges of China Plus One – 15 April 2024
