For decades, Vietnam's second-largest city, the port of Hai Phong, was a sturdy industrial workhorse, unremarkable beyond its own borders. Today, it is emerging as a potential global maritime hub. If predictions are accurate, it will house 4.5m people by 2050, drawing in foreign capital with structural reforms and a concerted effort to become the easiest place in the region to do business in.
Hai Phong's ambitions are a symptom of something larger: the fragmenting infrastructure of global trade. "What we had in the early 2000s up until recently was artificially low prices based on the idea that almost all countries of the world would get along, would follow the rules," says Elisabeth Braw, author of Goodbye, Globalization: The Return of a Divided World. "That was never going to last in the long run." Disruption to supply chains caused first by the financial crisis, then by covid-19, wars in Ukraine and the Middle East, as well as Donald Trump’s trade tariffs, have led many to predict the end of globalisation. However, evidence shows that trade, rather than shrinking, is actually reorganising along new political and technological fault lines. Capital is following the shift.
The rise of agile economies
The World Trade Organisation refers to this reorientation as "friend-shoring": the restructuring of supply chains to favour politically trusted partners over merely efficient ones. McKinsey analysis identifies Mexico and Vietnam as major beneficiaries. India and parts of Eastern Europe are emerging as serious infrastructure players. Where Chinese manufacturing once seemed irreplaceable, alternatives are being built with striking speed. The transition has created unexpected opportunities for agile smaller economies, too. Estonia, says Braw, has made itself unusually welcoming to foreign businesses. "It's small, so you're never going to get big investments, but Estonian authorities make it so easy to set up businesses there." Vietnam, she says, saw what was coming earlier than most. "Vietnam recognised early on that the discord between the West and China would open phenomenal opportunities."
A changing tipping point
The opportunities are not purely defensive, born out of necessity and supply-chain anxiety. Many of these economies are young, urbanising and increasingly technology-driven. India's digital infrastructure, Vietnam's manufacturing sophistication and Mexico's proximity to the United States are structural advantages, not temporary ones. The capital flowing into them reflects that.
This complexity has direct implications for how portfolios are constructed. "Geopolitics are creating market surprises," says Lilian Chovin, Head of Asset Allocation at Coutts. "Past winners may not lead in the future, and investors need to expect greater divergence across markets and regions."
Geopolitics are creating market surprises. Past winners may not lead in the future, and investors need to expect greater divergence across markets and regions.
Lilian Chovin, Head of Asset Allocation at Coutts
Navigating a multi-asset map
The shift in emerging markets also demands a more nuanced view than investors have historically applied. "The emerging market equity region has been seen as a commodity cyclical play for many years," says Chovin. "Now that couldn't be further from the truth." Increasingly, the most compelling growth stories in developing economies are in technology and services, not raw materials. Whether a company is Vietnamese, Indian or Korean matters less, according to Chovin, than whether it can grow its earnings faster than the broader market.
The biggest risk is not market volatility per se but an investor being frightened into taking the wrong decisions at the wrong moment.
Lilian Chovin, Head of Asset Allocation at Coutts
There is a human dimension to all this, too. Volatile markets produce not just financial risk but behavioural risk. There is a danger that clients make poor decisions when under pressure. "The biggest risk is not market volatility per se," says Chovin, "but an investor being frightened into taking the wrong decisions at the wrong moment." Stewardship, transparency and clear communication about what is happening and why have become as important as asset allocation itself.
Far from dying, the rerouting of global trade provides new opportunities. For investors, the task is not to mourn the old map, but to read the new one clearly—and to move before everyone else catches up.
Explore more
Commentary on investments is for information purposes only and should not be taken as advice. This content does not constitute investment advice.