APAC Rising Markets To Profit From US-EU Diversification Of Supply Chains

Asia-Pacific emerging markets are expected to benefit from ongoing supply chain decoupling, as analysts highlight the efforts of the United States and Europe to diversify risks in security-related sectors.

During an online event, Steven Cochrane, Moody's Analytics' chief Asia-Pacific economist, recently discussed the decoupling between the US and China in intermediate goods production. He explained that incentives, not government policies, are driving the growth of the semiconductor industry in the United States and Europe.

Due to their vast labour market resources, Cochrane believes that the Asia-Pacific economy, particularly India and Southeast Asia, can capitalise on this de-risking or "China plus one" sentiment.

According to Moody's Analytics, electronic exports from Southeast Asia and Taiwan have been declining since late 2022, with significant contractions in Singapore and South Korea. In the first quarter of this year, the domestic electronics export rate fell below 20%.

In the words of Denise Cheok, an economist at Moody's Analytics, this correction is due to high export prices peaking in 2021 and 2022, as well as a slowdown in major economies such as China, the United States, and the European Union, which are major drivers of demand for electronic products.

Cheok said,“We are still looking for a bottom for this current downturn. We do not see the turnaround just yet, as it is expected to extend perhaps to the end of the year before demand slowly starts to pick up in 2024, where we forecast there will be a recovery in the global economy.”