Cargo containers are stacked on top of a ship on November 22, 2021 in Bayonne, New Jersey.
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Morgan Stanley said most acute supply chain disruptions have been eased and will be more fully addressed in the first half of 2022.
That’s the base case the investment bank made in a recent report assessing the global supply chain, its risks and bottlenecks.
This year’s supply chain crisis has hit companies hard as bottlenecks grow and industrial production fails to meet the post-pandemic spike in demand. Energy Shortage in China and Europe, as well as Covid-related lockdowns, have contributed to a massive squeeze in the supply chain.
Supply chains remain vulnerable, especially as the world is still assessing the risk of emergence of new strains of omicron, said Morgan Stanley.
“However, Orders have skyrocketed amid worries about product sourcing, thus increasing backlogs and setting the scene for a clearer short-term than expected, particularly for consumer electronics and segments are facing the risk of demand destruction,” the bank’s analysts wrote in a December 14 report.
Morgan Stanley predicts logistics costs will remain “significantly higher” and will “persist through 2022”. “Quarantine and travel restrictions are unlikely to be eased on key transcontinental routes in a coordinated manner through 2022, with little new capacity through the end of 2023.”
For companies that make tech hardware, Morgan Stanley is cautious about those with high backlogs and limited visibility into when demand will return to normal. It said it prefers semiconductor companies exposed to automotive and industrial materials.
The most important stock for the supply chain
The investment firm has identified companies it says are “regional champions” that “recognize their importance to supply chains and the role policymakers can play.. . to support their position against competitive pressure from other spheres of influence.”
These companies have indeed stood out through the global supply chain challenges of 2020/21, but broadly, we also see them showing fertility trends, the report said. stronger returns and significantly outperforms the MSCI ACWI global equity benchmark.” The MSCI ACWI Index includes MSCI world stocks as well as emerging market indices.
These are the top stocks that Morgan Stanley says are the most “central” to the supply chain.
- Technology hardware: Apple, HP, Cisco, Lenovo, Fujitsu, Hitachi
- Semiconductor: Samsung Electronics, Intel, Infineon Technologies, NVIDIA
- Automotive and components: Volkswagen, Ford Motor, Daimler, Synthetic engine, BMW car, Tata Motors, Renault, Hyundai Motor, Continent
- Software: Microsoft, IBM, Dell, SAP
- Insurrance: Berkshire Hathaway
- Consumers: Sony, Panasonic, LG Electronics
- Retail: Amazon
- Material of manufacture: Volvo AB, Siemens
Companies are squeezed by bottlenecks
Morgan Stanley also lists the companies it says are most pressured by supply chain bottlenecks.
“Industries in this category are the most powerful transmitters of supply chain pressures, in part because companies in this group face a continued dependence on inputs,” the company said. labor despite increased automation or capital investment”.
Together with other factors such as reliance on trade-sensitive markets or other policy conflicts, this “makes such companies vulnerable to geopolitical and labor dynamics, but is also important to the global supply chain.” Some examples include shipping containers and semiconductor companies.
Such companies may be facing cost pressures, according to Morgan Stanley, but they still retain pricing power thanks to their industry positions.
These are stocks in the category of “bottlenecks”.
- Semiconductors: Infineon, ST Microelectronics, NXP . Semiconductor, Microchip technology, Texas Instruments, Similar equipment, Semiconductor ON, Globalfoundries, Nuvoton Technology, Nanya Technology
- Technology hardware: BYD Electronics, Wingtech Technology, Unimicron, Kinsus Interconnect Tech, Nan Ya PCB
- Network equipment: Lumentum, II-VI, Corning, CommScope
“In the face of disruptions and capacity constraints, there are many options other than price increases to offset higher input costs or to increase rations capacity due to backlogs,” Morgan Stanley said. Stanley said companies are facing bottlenecks.
