For private equity investors, changes in Chinese government policy, the country’s Belt and Road Initiative and a growing middle class are opening up new opportunities.
Kylla investment manager Guodong Ni is upbeat about the potential. Guodong connects investors in China and ASEAN companies, and helps clients across South East Asia find strategic investors via Kylla’s worldwide investor networks. “We see a lot of exciting developments,” he says. “The number of Chinese companies going to IPO is increasing drastically, more and more companies are looking into cross-border M&A, and the size of deals is increasing.”
This trend has been growing for a while but gained speed in 2018 and looks set to continue in 2019. Guodong points out that while Chinese banks are becoming more risk-averse, the appetite of the country’s SME companies for finance is showing no sign of diminishing. At the same time, the government has signalled its willingness to open the Chinese investment market to foreign investors. And according to Morgan Stanley, China’s rapidly expanding middle class is expected to have savings worth some $23.8tn by the end of this year.
“We opened our operation in China because of what we see happening there and the change from just a couple of years ago,” says Guodong. “The downturn in the Chinese economy in 2018, the rising geopolitical challenges and changes in government policy offer boutique private firms like Kylla the opportunity to strengthen our connections in China. We have a strong business in Europe, and we are developing a lot of new business in South East Asia through our offices in Hong Kong, Singapore, China and Thailand.” This places Kylla in a strong position to spot opportunities early and connect these to investors globally, and to connect high net worth individuals in China with opportunities abroad.
A further opportunity is provided by China’s Belt and Road Initiative. “This offers Kylla good opportunities,” says Guodong. “We already have many mandates from Thailand, Cambodia, Vietnam and Laos to become part of it, and through this we can connect investors to companies from two sides of the border.”
Nor are the opportunities limited to investments in China and South East Asia: “Chinese companies are also looking to invest in foreign agri-business, biotech and other high-tech industries, and there are many Chinese investors who want to diversify into underlying assets in Europe. Kylla is in the middle to facilitate this, and we are getting a lot of inquiries,” he adds.