China Jitters Turn Private Equity Investors Towards India and Indonesia

MoFo Partner Steve Tran was quoted in a recent article, “China Jitters Turn Private Equity Investors Towards India and Indonesia,” published by Nikkei Asia.

The article explores how private equity investment has shifted to South and Southeast Asia as investors become increasingly nervous about investing in China due to its slow recovery and lack of new growth drivers. However, experts warn they face a steep learning curve and potentially limited choice of exit routes in many of these markets.

While investor sentiment towards China has remained broadly the same in the past six months, there has been “a higher bar for China investments,” according to one Hong Kong-based investment banker.

Many Southeast Asian companies who were keen on China during the pandemic are now redirecting their focus back to their home markets. However, allocating capital to Southeast Asia can be challenging given the fragmented landscape. A less mature capital market compared with China means fewer transactions and smaller deals, adding pressure on deal-sourcing capabilities to justify resources.

Notably, there are differing business practices and norms from country to country; for example, doing due diligence in Vietnam can be particularly challenging.

Steve explains, “It is not unusual to encounter companies with 'selective record-keeping' that make it hard for private equity investors to get a complete picture of their business.”

“The situation is also not helped by the fact that the overall business environment in Vietnam tends to be less transparent than many foreign investors might be used to,” he adds.

Read the full article.