 "PE funds moving away from China to India")
Private equity funds are moving away from China amid its tensions with the United States of America (USA) and are now increasingly focussing on India and Japan, a report by the South China Morning Post (SCMP) said on Friday.
According to the "Asia-Pacific Private Equity Report 2023" released by Bain & Company in March, the deal value in Asia-Pacific fell 44 per cent in 2022 to $198 billion as compared to 2021. But Greater China has suffered the lowest plunge.
"Greater China, the region's private equity powerhouse, suffered the biggest contraction in deal activity. Covid lockdowns, declining growth, and Sino-US tensions contributed to a 53 per cent drop in Greater China deal value from a year earlier. That fall depressed Greater China’s share of Asia-Pacific deal value to a nine-year low of 31 per cent," the report said.
It added that the Covid-19 lockdowns, declining growth, and US-China tensions led to a 53 per cent drop in Greater China deal value, shrinking its share in the region to a nine-year low of 31 per cent. On the other hand, India's share expanded to 23 per cent from 15 per cent.
Moreover, while India's deal value fell 25 per cent in 2022, it was still 23 per cent more than the average size between 2017 and 2021. In China, the average deal value was 38 per cent lower than the average during the same period.
The report also said that Covid-19 lockdowns, the contraction of manufacturing in China, and the stress in the US-China relations led to diversification by global firms to India. The investors, it added, are favouring companies in sectors like electronics, textiles and pharmaceuticals.
Another destination in Asia investors are looking at is Japan. This is mainly due to the undervaluation of companies and low financing costs making it an attractive market. This is leading to more and more investments in conglomerates like Hitachi, Toshiba, Olympus and Fujitsu.
In the report, Luke Pais, Asia-Pacific private equity leader was quoted as saying that despite this China will still remain a market that will not be avoided by private equity funds.
