To a significant extent, successful investing in today’s markets means identifying, mapping and harnessing disruptive forces. No market is immune. From technology to transport; media to mining, disruption is simultaneously driving and destroying value.
Five of Morgan Stanley’s leading global analysts gathered recently at the Australia Summit to discuss the disruptive forces shaping global markets and to map out the key themes investors should consider as they assess their portfolios.
Lead European Transport Analyst
The airline industry was one of the first in the transport sector to feel the effects of disruption with online aggregators taking intermediate customers away from the airline.
That trend is now reversing with airlines regaining control of the customer relationship.
This dynamic is creating a new form of disruption.
The freight transport industry, which remains significantly fragmented, is being meaningfully disrupted by the activity of ecommerce giants. Scale is of critical importance.
The impact of innovation is also being felt as technology is applied to reducing the costs associated with humans and fuel which currently account for 50% of the cost of shipping.
The investment in end-to-end supply chain visibility in the freight sector represents one of the most compelling investment opportunities within transport.
Head of China Internet Research
China has experienced remarkable growth in consumer use of the internet and that growth has fuelled advancements in sectors such as third-party payments. However, growth in overall internet users has slowed to single digits in recent years, which is leading to slower growth in consumer internet revenue.
Future growth could be driven by the industrial internet which is at a much earlier point of the cycle.
Enterprise IT spend in China was only 18% of the level of the US in 2018 and the proportion of that spend allocated to software and IT services was also significantly lower than the US.
Significant investment in infrastructure may be required.
Lead European Media Analyst
Media has faced an extraordinarily challenging environment over the past 20 years. The internet has permanently lowered the barrier for new entrants and changed the media landscape beyond recognition.
This disruption looks set to continue, driven by further investment in infrastructure. As more reliable and faster connectivity continues to spread, new methods of consuming media are likely to continue to proliferate.
There are interesting developments taking place where producers are taking back the rights to their content from distributors.
This interplay between producers and distributors; subscription and advertising models; broadcast and online will be something to watch.
Lead US Software Analyst
Software is changing the world through two primary vectors:
Every company wants to be a software company.
Everything about software is changing.
The changes to software are fundamental:
Where it is run has changed. On-premise infrastructure has relocated to the cloud and software now runs on a plethora of devices – from fridges to industrial robots.
It’s being built differently. Development is faster, in modular, functional components that are more easily improved.
It can do more. Machine learning is vastly expanding the capabilities of software.
It no longer has to be deterministic – it can be goal or optimisation driven.
It’s being sold differently. Massive up-front costs have melted away and software is more often sold as a service using subscription models.
For advice on how to harness the potential of these disruptive forces, speak to your Morgan Stanley financial adviser.