In covid times, automation gains traction as an upcoming investment theme


MUMBAI: As the coronavirus pandemic rages on world over, increased automation due to reduced physical contact has become the new normal. And central banks have taken cognisance of this. So, many of them have allocated a part of their stimulus packages to boost the use of technology. In fact, in its recent research paper, the International Monetary Fund cited examples of governments leveraging mobile technologies to help citizens get direct cash transfers.

Consequently, investors are increasingly focusing on automation as an upcoming investment theme.

Global research house UBS AG said covid-19 has accelerated the adoption of disruptive technology and has recommended adding long-term exposure to such trends.

“We see four areas of opportunity to benefit from this trend: enabling technologies, including artificial intelligence, 5G, and augmented reality and virtual reality; technologies that shape how we work, learn, and consume, such as e-commerce and electronic payment solutions; technologies that change the use of land, such as data centers as remote working increases; and the innovations of tomorrow that could disrupt the current marketplace, such as quantum computing and solid-state batteries,” analysts at UBS AG said in a blogpost dated 22 June.

Singapore, in its fourth stimulus package, has allocated resources to help, support and incentivise businesses in digital transformation. Korea, Indonesia and Malaysia are some of the others to have announced digitalisation and e-commerce push via loans/grants in their packages. Also, with more and more people working from home, laptops, tablets, and smartphones may see increased demand. All of that is for automation.

Research house Morgan Stanley believes that investing in technology would enhance productivity, which would help companies to repair their balance sheets faster. “Indeed, as part of the policy response to deal with covid-19, we have seen policymakers refocus efforts towards technology, digital transformation, and innovation. Economies which adopt these reforms quickly will fare better in the post-covid-19 recovery,” it said in a report on 14 June.

But before one gets too excited about this trend, some downside risks should be taken into consideration. Especially because as an investment theme automation is still at a nascent stage.

According to Tak Nishikawa, a research analyst with US-based Fidelity Investments, “While automation benefits from strong secular tailwinds, it is also cyclical. When manufacturing companies feel comfortable expanding, they may invest in machines, like robots. So the robotics industry is tied to the capital expenditures of businesses, which rise and fall with the business cycle.”

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