Investment summary

In recent years, broad economic and policy developments have highlighted to firms that far-flung,
complex supply chains carry unexpected risks. This point was highlighted by then US President Trump’s trade wars, and driven home by the Covid-19 pandemic. Given the vulnerabilities that have been exposed,
many firms will have to review lessons gleaned and make adjustments in their operations. One likely outcome is a further embrace of digitization and electronic tracking of inventories and logistics, as well as
overall industrial automation leveraging on technology such as robotics. The ultimate goal is to deploy key classes of information more efficiently to facilitate production and, in the process, make inventory
management more robust to shocks. As such, we expect investments in automation and digitization,
already major focus areas, to increase in order to improve efficiency and information flow. We discuss the
outlook for various segments (industrial software, industrial IoT platforms, discrete automation, process
automation and robotics), as well as the companies exposed to the overall industrial automation theme.
Names which are currently BUY-rated include Emerson Electric [EMR US; FV: USD107], General Electric [GE US; FV: USD131]; Mitsubishi Electric [6503 JP; FV: JPY1800]; Shanghai Baosight Software [600845 CH; CNY75.90]; Shenzhen Inovance [300124 CH; CNY82.60]; and NARI Technology [600406 CH; NY46.20].

• From Globalisation to Localisation and Diversification – the core of it all is Security

• Changes in China’s industry structure, US-China trade tensions and Covid-19 are key drivers of
movements in supply chains

• Further digitization and automation inevitable over the longer term