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Emerging Markets Outlook: Investment is strong, but uncertainty remains – Logistics Management

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The $4.9 trillion global logistics market operates as the backbone of international trade, which grew 272% from 2000 to 2021. Expectations for the global logistics market to grow to $6.55 trillion by 2027, coupled with continued growth in e-commerce and the rebound of contract logistics, has companies looking to reimagine their logistics operating models.

However, companies continue to deal with disruption from the pandemic, which has now been further complicated by the war in Ukraine. In fact, a recent Accenture report found supply chain challenges arising from the pandemic and Russia’s invasion of Ukraine could result in a potential €920 billion cumulative loss to gross domestic product (GDP) across the Eurozone by 2023.

Because of these complications, supply chain networks need to be more flexible and efficient while building resilience, relevance and sustainability into the core. Supply chain networks are often more global—not less—with companies using factories that are higher tech, smaller, more numerous, more local, and closer to customers.

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As companies build these networks, they’re investing in digital capabilities to enhance service levels and control costs—and they’re also looking to omni-channel fulfillment platforms with dynamic order allocation capabilities to meet ever-changing customer demands.

Transforming with the latest technologies and ensuring resilience and sustainability are embedded throughout these supply chain networks will make companies future-ready and better equipped to managed potential disruptions.

The expansion of emerging markets is an important consideration. As companies look to uncover new channels for growth, they’re continuing investment in emerging markets.

Disruption: Supply chain shocks and the accumulation of disruption

Depending on the length and severity of the war, the cost of supply chain disruption in the Eurozone across 2022-2023 could amount to € 242 billion (2% of GDP) in an ongoing war scenario or € 920 billion
(7.7% of GDP) in an protracted war scenario.

Logistics Breakdowns
• Transportation bottlenecks worsened input shortages and sent costs skyrocketing.
• Continued lockdowns in Chinese ports and war in Ukraine further strain the issue.
• 90% of Ukraine’s wheat exports have halted due to port closures. Ukraine accounts for nearly 10% of global wheat exports. Wheat prices hit record highs, rising 30% in 2021Q1 on previous quarter.

Energy Security 
• Energy markets were already undersupplied before the war given the economic recovery.
• The war in Ukraine has caused further oil and gas price spikes: the price of brent crude oil could peak at 115 USD per barrel in 2022.
• Suppliers are shutting down some operations becauseenergy costs are too high, which creates another wave of input supply shocks.

Lack of Material Supplies
• Resurging demand and initial precautionary hoarding led to inflation and overwhelmed supply chains.
• The concentration of suppliers for critical minerals and food is compounding challenges.
• For example, Russia is one of the largest suppliers of palladium, platinum and diamonds, while Ukraine is the critical supplier for neon gas, agricultural products, and metal ores.

A Tight Talent Market
• Labor and skill shortages plagued most industries.
• The war has created further tension in targeted skills areas like transportation.
•14.5% of the global seafarer workforce are from Russia and the Ukraine.

Thailand

Thailand continues to make large strides in their economic development. Logistics investments have been fast-tracked as the country obtains more market share.

Thailand had previously broken ground in 2021 on mega-projects worth $5.3 billion to improve national infrastructure focused on roads and rail. This is highlighted by a rail line that will better connect six provinces within a 50-mile radius to Bangkok. Supporting urban sprawl in Thailand is now imperative as the people of Thailand continue to prosper despite economic setbacks associated with the pandemic.

In total, Thailand has $60 billion planned in spending to help support The Ministry of Transport’s 40 mega-projects. Year-over-year, Thailand was able to jump three spots up on Agility’s Emerging Markets Logistics Index Top 20.

Vietnam

Although delayed action from policy makers has caused Vietnam to lose logistics market share, despite prime real estate and economic growth, Vietnam is still considered to be an integral part of omni-channel growth and a large contributor to the internet economy.

Vietnam has positioned itself as key player associated in the Asia-Pacific (APAC) region, with e-commerce spend growing 24% year-over-year. As a benefactor in the U.S.-China trade war, as manufacturers are forced to diversify supply chains networks, Vietnam’s core competency is related to labor intensive industries due to their low labor cost.

With 2,030 miles of coastline, Vietnam holds a strategic position for the maritime industry, seeing a 7% growth year-over-year in twenty-foot equivalent units (TEUs). Vietnam had started to invest in the growth of a Da Nang mega-port as early as 2016, which has promised to support 27.2M tons by 2030 and 92.5 million tons by 2045.

However, Vietnam is challenged by size constraints driven by underdeveloped infrastructure, as evidenced in dropping three spots on Agility’s Emerging Markets Logistics Index Top 20.

Mexico

Although hit hard by the pandemic in 2020 with an 8.6% economic contraction, Mexico was able to make-up and surpass 2019 GDP ($1.269 billion) in 2021 ($1.285 billion). Despite economic turbulence, Mexico benefits from a strong trade-partnership with the United States as well as a private-backed investment in infrastructure.

Of the $44 billion committed, 33% is planned to go toward transportation projects, including highways, rail, ports and airports through 2024. With a trend of shippers looking to position closer to their customer, Mexico holds the highest forecast compound annual growth rate—tied with India—at 10%.

India

Like Mexico, India is projected to maintain a 10% annual growth rate and maintain Agility’s ranking at No. 2. India Goods and Services Tax, as well as private-sector investment, have been a catalyst for infrastructure improvement since its inception in 2017.

Due to this infusion of money, India has already built 3.5 million miles of roads, second only to the United States. However, India’s National Infrastructure Pipeline (NIP), a $1.2 trillion infrastructure program, will support continued investment.

Logistics related NIP calls to action are 34,000 more miles of road development; a National Rail Plan implemented by 2030 to support a multi-modal transportation solution with the goal of hauling 45% of freight on rail by 2030; and moves to address digital infrastructure to match the growing business demand and provide access to all citizens.

The Indian government is not just prioritizing interconnected transportation infrastructure, but also making a $94 billion investment in sustainability. The Jawaharlal Nehru National Solar Mission aims to deploy solar energy technologies to create favorable conditions for solar manufacturing capability.

Indonesia

Driven by government restrictions on business during the pandemic, logistics business activities have declined 50%, however current GDP growth indicates economic rebound.

The majority of the Indonesian logistics market is driven by transportation, predominantly road freight, accounting for 70% to 80% of total volumes within their borders. However, 90% of Indonesia’s exports are moved via ship.

Indonesia’s Ministry of National Development released a $412 billion infrastructure investment plan in 2019 to address the World Bank’s assessment of a $500 billion infrastructure investment gap in 2017.

Indonesia remains steadfast in its commitment to plan, aiming to finish the Trans-Sumatra Tolls Roads by December of 2022, effectively providing an additional 1,751 miles of roadway to travel on, with a commitment to complete construction of 3,000 more miles. The goal is logistics cost reduction as well as connectedness within the island to support maturing e-commerce market demand.

Malaysia

As ships have grown 2.9 times larger from Post Panamax II to Megamax-24, so must the ports that support their throughput. Malaysia now has two of the three largest ports of all emerging market countries with both ports achieving strong container volume increases in 2021.

Malaysia will look to grow port infrastructure to capture economies of scale driven by larger ships. Stating with a $179 million expansion in 2022 for the Port of Tanjung as well as multi-million, private-sector investment within facilities in Port Klang. The freight and logistics market in the region is expected to continue to grow, registering a 4% increase to CAGR through 2027.

Looking ahead

Through the end of this year and into 2023, shippers will have to continue to break the physical limits of supply chains, enabling organizations to do more with less and meet customers’ growing expectations for order fulfillment in a cost-efficient way.

Emerging themes to watch in the United States

After historic spending on freight in 2021, shippers are starting to reap the benefits of a softening truckload market. The DAT dry van load-to-truck ratio was at 4.57 in April, down 37% month-over-month and 21% year-over-year, with contractual rates surpassing spot rates in March 2022.

For the first time since June 2020, we’re starting to see normalization of route guide tender acceptance and a stabilization on spot market rates.

Shippers and carriers are shifting their concerns to the now historic rise in diesel prices. Truckload carriers and private fleet managers are
continuing to focus on basic operating efficiencies.

This includes, but is not limited to, fuel mileage being reduced by 3%, increase utilization of equipment, and implementation of electric vehicles. The question remains of how to mitigate risks related to energy consumption, which will be a theme in the United States moving forward.

Leveraging capital investment and technology to better support global logistics channels will unlock greater capacity and cost-efficiencies of emerging markets.

As shippers continue to pivot toward more and more emerging markets, supply chains need to be redesigned with economic diversification in mind, as well as sustainability and resilience. Though, keep in mind, global uncertainty and unrest will always affect supply chain networks.

Whether the issues arising are an increase in costs, a shortage of labor, or additional trade barriers, shippers need to quickly pivot to reimagine, build and operate supply chain networks that orchestrate change, simplify life, and positively affect business, society and the planet.

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Amazon Adds $2.75 Billion To Anthropic Investment, Sora Goes To Hollywood – Forbes

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Amazon invests $2.75 billion in Anthropic. This brings Amazon’s investment to $4 billion, as it follows its previous investment of $1.25 billion, which gave the company the option to invest the additional funds. This comes as Anthropic’s new Claude-3 chatbot outperforms ChatGPT- 4 in recent tests. Amazon has unique insight into Anthropic’s performance as it is one of the suite of AI models offered by AWS, which include most of Claude’s competitors.

Sora Goes To Hollywood. Everyone is reacting to a Bloomberg report that OpenAI will soon be meeting with studios and other Hollywood stakeholders to demonstrate the capabilities of the text-to-video generator and explore partnerships. OpenAI says unnamed “A list” directors are already using it.

Based in Toronto, shy kids are a multimedia production company who utilized Sora for the above short film about a man “who is literally filled with hot air.” His head, as you can see, is a yellow balloon. “We now have the ability to expand on stories we once thought impossible,” shares the trio made up of Walter Woodman, Sidney Leeder and Patrick Cederberg. Walter, who directed Air Head, said as great as Sora is at generating things that appear real, what excites us is its ability to make things that are totally surreal.

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Neuralink Shows Paralyzed Patient Playing Chess on a PC. Elon Musk’s brain-computer interface company shared a video of its first human patient, Noland Arbaugh, playing chess and Civilization VI using their brain implant. Arbaugh, who is paralyzed below the shoulders, described the experience as “just stare somewhere on the screen” to move the cursor. While some experts see this as a promising step, others emphasize that it’s still early days and the technology has limitations. Arbaugh acknowledged that there’s still work to be done, but the implant has already changed his life.

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Illuvium Labs Raises an additional $12 million for NFT Gaming Universe. Following an extensive three-and-a-half-year development journey and $60 million in funding, Illuvium Labs is on the cusp of unveiling its interoperable gaming universe. It will feature three interconnected titles designed to utilize the same NFTs seamlessly across all games, promising a first-of-its-kind experience. The influx of $12 million in Series A funding from esteemed firms like King River Capital, Arrington and Animoca will be allocated to developing new gaming titles within the Illuvium ecosystem.

Databricks’ DBRX claims the crown as best open-source LLM. It’s a list that includes Meta’s Llama 2 and Mistral’s Mixtral. Leading companies like OpenAI, Google, and Anthropic sell, or rent, their proprietary private models to enterprises and subscribers. DBRX was produced for just $10 million, orders of magnitude less than its competitors. On Monday, Wired reported that the company showed data proving its AI model’s reading comprehension, answers to general knowledge questions, and coding is superior to other open-source models that can be downloaded from Hugging Face and modified by users.

Shiba-Inu Metaverse leader steps down amid dispute over IP. Marcie Jastrow, the well-regarded Hollywood executive who led Technicolor’s XR efforts, has left the company. This led the company’s legions, known as the Shib Army, to speculate about malfeasance, which is easy to do, because Jastrow is the only person involved who is not anonymous, including Ship’s charismatic leader Shytoshi Kusama.

This live football experience was built by Immersiv.io to showcase how AR can transform the live sports broadcast and fan experience using the Apple Vision Pro. Immersiv.io worked with the Bundesliga (the German Football League) on the production. In a post on X, the company said. “This is a 3D reproduction of the live game integrating TRACAB Gen 6 live skeletal data of all players and the ball, complemented with real-time insights, offering the ultimate live tactical perspective of the game.”

SXSW 2024: XR That Makes You Go Wow. The XR competition was won by an AI experience, The Golden Key. This is the second year in a row that an XR experience did not take the immersive festival’s grand prize.

The second annual AI Film Festival is coming to Los Angeles on May 1, and New York May 9. Seats are limited, request to attend at http://aiff.com

This column, once called “This Week in XR,” is also a podcast hosted by author Charlie Fink, and Ted Schilowitz, former studio executive and co-founder of Red Camera, and Rony Abovitz, founder of Magic Leap. This week our guest is Liz Hyman, CEO of the XR Association. We can be found on Spotify, iTunes, and YouTube.

What We’re Reading

Where Will Virtual Reality Take Us? (Jaron Lanier/New Yorker)

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FP Answers: What is a 'behavioural edge' in investing and how does it affect returns? – Financial Post

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Temperament is the unsung hero of investing success

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By Julie Cazzin with Felix Narhi

Q: What is a “behavioural edge” in investing? How does it potentially enhance returns? How can an investor develop it? — Giovanni

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FP Answers: Giovanni, the term behavioural edge is just another way of saying “temperament,” which refers to the habitual way a person behaves in each situation. For example, one person may be easygoing and relaxed while another is more likely to be impatient and assertive.

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Temperament is the unsung hero of investing success. Gaining insight about our innate emotional temperament and learning how to work with it gives investors an edge.

The common misconception is that you need a high level of intelligence to be a successful investor. No doubt, that can be helpful, but based on many years in the industry, I’ve seen it is not always the most important differentiator.

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Once someone has at least an average level of intelligence, it is temperament that often provides the investing edge in leading to better returns over the long term. “Investing is not a business where the guy with the 160 IQ beats the guy with the 130 IQ,” famed investor Warren Buffett has pointed out.

Having the right temperament can potentially enhance investment returns in several ways. An investor who is very reactive to external events is likely to fare poorly over the long term because, quite simply, the world is full of uncertainty and always will be. Markets are highly reactive, abetted by algorithmic trading and automatic rebalancing by exchange-traded funds. Individual investors should not be.

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Research shows that investors who trade frequently or try to time the market underperform. On the other hand, those investors who can remain calm and patient throughout market cycles do better because markets historically trend upwards. Hands down, being calm, cool and collected is the right temperament for an investor to have.

The concept of “homo economicus” — or economic man — describes a hypothetical person who consistently makes rational decisions. In real life, our decisions are coloured by our formative experiences, moods, external circumstances, what we ate for lunch and a host of other factors. These influences drive our behaviours, but they often operate below conscious awareness (even artificial-intelligence apps “hallucinate”).

Given that behaviour is some combination of cognitive and emotional inputs, an investor can create an edge by developing a disciplined investment process that overrides temperament, especially during highly volatile periods.

The term “active patience” means being clear about your investment principles and what you are looking for, and practicing active patience until the right opportunity arises.

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In contrast, regular patience is making an investment decision and sticking with it no matter what, even if it was the wrong decision. The latter approach is unlikely to bring financial success, which is the major goal of investing.

Active patience is what Buffett would call the “fat pitch,” which occurs when the market (occasionally) presents a very attractive opportunity. It is easy to spot a great opportunity and take full advantage of it when an investor has clear principles on what they are looking for.

Can we change our temperament? Recent studies show that personality traits and moods are subject to change, sometimes within the hour, so temperament may not be as fixed as we’ve been led to believe.

Becoming a better investor starts with self-knowledge — and lots of practice. The behavioural traits associated with good investment outcomes are patience, discipline, emotional control and risk awareness. It so happens, these qualities lead to good life outcomes, too. A calm temperament is the bedrock of making sound investment decisions.

Every investor must determine for themselves how to achieve greater equanimity and there is no shortage of books, videos and TikTok tutorials on that evergreen topic. I would also add the importance of staying humble.

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In investing, as in life, the learning never stops. Staying open to new information and having the courage to challenge our own and others’ beliefs and habitual behaviours are the keys to future success.

Felix Narhi is chief investment officer and portfolio manager at PenderFund Capital Management Ltd.

Bookmark our website and support our journalism: Don’t miss the business news you need to know — add financialpost.com to your bookmarks and sign up for our newsletters here.

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Lenders Rally After India’s Central Bank Eases Investment Curbs – BNN Bloomberg

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(Bloomberg) — Indian banks and shadow lenders rose Thursday after the country’s central bank eased capital requirements for a unique type of investment, a move that may free up more funds for loans.

The gains came after the Reserve Bank of India issued Wednesday modified rules on lenders’ required provisions for exposure to alternative investment funds, or AIFs, that invest in the lenders’ borrowers. Under the new policy, a lender needs to set aside capital only for the amount the AIF invested in the debtor company, and not the entire investment of the lender in the AIF.

Shares of Piramal Enterprises Ltd., which reported among the biggest provisions for such investments, closed 1% higher after rising as much as 6% during the day. A gauge of financial services firms climbed 1%, the most since March 1.

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Lenders led the rally in the broader market, with the NSE Nifty 50 Index registering its best day since beginning of the month.

The RBI’s softening stance came after industry players raised concerns over clarity and uniformity after it announced in December restrictions on lenders’ exposure to AIFs that hold stakes in their borrowers. The latest move will likely help firms including Piramal, HDFC Bank Ltd. and IIFL Finance Ltd. reverse some of their relevant provisions made previously, according to analysts at Citigroup Inc. and Jefferies Financial Group Inc.

Read more: India’s Crackdown on Financial Risks Puts Industry on Watch

“Select private banks and NBFCs like Piramal had provided for their entire AIF exposure during 3Q and could see some write-backs in 4Q if they decide to reverse the excess provision,” Jefferies analyst Bhaskar Basu wrote in a note.

Regulators introduced a flurry of new rules last year to prevent a buildup of financial stress at a time when India’s economy remained resilient in the face of rising interest rates, slowing global growth and unabated geopolitical tensions.

©2024 Bloomberg L.P.

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