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CONTRIBUTORS

Kim Catechis

Investment Strategist, 
Franklin Templeton Institute

Karolina Kosinska, CIPM

Analyst
Franklin Templeton Institute

Preview

This is one of five papers from the full report—Consider This: The weaponisation of supply chains—exploring how key supply chains are evolving – and what it means for long-term investment strategy.

Shipping is the invisible engine of global trade – moving 11 billion tons of goods each year, from raw materials to finished products. But its role in supply chains is becoming more visible, more politicised, and more vulnerable. In this paper, we examine how maritime logistics is being drawn into the geopolitical arena. From defence readiness to trade resilience, the implications are wide-ranging.

Investors should not underestimate the coming disruption of trade with the United States because of these measures, and although there will be increased investment in building a US commercial fleet over time, it will have to wait for US Navy orders to be completed first. Consequently, leveraging the capabilities of reliable allies such as South Korea and Japan is welcome. Just as defence manufacturers from these countries are benefiting from European rearmament, their shipyards are likely to benefit from forthcoming US orders.

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Equity securities are subject to price fluctuation and possible loss of principal.

International investments are subject to special risks, including currency fluctuations and social, economic and political uncertainties, which could increase volatility. These risks are magnified in emerging markets.

The government’s participation in the economy is still high and, therefore, investments in China will be subject to larger regulatory risk levels compared to many other countries. There are special risks associated with investments in China, Hong Kong and Taiwan, including less liquidity, expropriation, confiscatory taxation, international trade tensions, nationalization, and exchange control regulations and rapid inflation, all of which can negatively impact the fund. Investments in Hong Kong and Taiwan could be adversely affected by its political and economic relationship with China.

An investment in private securities (such as private equity or private credit) or vehicles which invest in them, should be viewed as illiquid and may require a long-term commitment with no certainty of return. The value of and return on such investments will vary due to, among other things, changes in market rates of interest, general economic conditions, economic conditions in particular industries, the condition of financial markets and the financial condition of the issuers of the investments. There also can be no assurance that companies will list their securities on a securities exchange, as such, the lack of an established, liquid secondary market for some investments may have an adverse effect on the market value of those investments and on an investor’s ability to dispose of them at a favorable time or price.

Investment strategies that incorporate the identification of thematic investment opportunities, and their performance, may be negatively impacted if the investment manager does not correctly identify such opportunities or if the theme develops in an unexpected manner. Focusing investments in the information technology- and/or technology-related industries carries much greater risks of adverse developments and price movements in such industries than a strategy that invests in a wider variety of industries.

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