Companies around the world will alter their supply chains to be less dependent on China in the wake of the coronavirus crisis, according to investor Mark Mobius.

Speaking to CNBC’s “Street Signs Europe” on Tuesday, Mobius, founder of Mobius Capital Partners, said the pandemic was already prompting a rethink among businesses as they sought to mitigate supply shocks from any future events of a similar scale.

“A lot of buyers and a lot of the people depending on the supply chain in China are now having second thoughts, and are beginning to diversify their supply chain as much as possible to be closer to home,” he said.

Mobius noted that in the United States, there would “of course” be a preference for companies based in the U.S., or in more local overseas markets like Mexico or Canada.

“But at the end of the day, I think there’s going to be a diversification where these supply chains get moved into places like Vietnam, Bangladesh, Turkey, even Brazil, so that these companies can have a more diversified supply chain,” he added.

Speaking to CNBC on Monday, independent analyst Fraser Howie also said governments would look to reduce their dependency on China, although he noted that there was “no way China’s going to be ignored.”

Meanwhile, IMA Asia’s Richard Martin said last week that although manufacturers across several industries had begun moving operations out of China before the Covid-19 outbreak, the pandemic was adding “a nationalist spin” to considerations around supply chain restructuring.

Many sectors, such as pharmaceuticals, agriculture and energy, have come under pressure amid the global health crisis, as their reliance on economies like China and limitations on international logistics have weighed on supply chains.

Meanwhile, U.S. oil prices have plummeted as the crisis has led to supply outstripping demand, causing West Texas Intermediate (WTI) oil futures contracts for May delivery to plunge into negative territory for the first time in history on Monday.

Mobius told CNBC Tuesday that many emerging markets would benefit from the commodity’s move downward.

“The price of oil, that’s a great boost for a number of emerging market countries, like India, like China, and so forth — countries that are importing oil — it’s wonderful news,” he said. “So although it’s bad for the oil companies, it’s great for some of these countries.”

Source: CNBC – 21^st April 2020

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