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Asia Pacific Private Equity outlook for 2022
The general feel amongst APAC focused investment companies is that overall performance in the region during 2021 has been extremely positive. It could be said that APAC private equity investors have shrugged off the mayhem of the pandemic and subsequent disruption to supply lines, to come out fighting. Undeterred by the uncertainty, each APAC country has raised the bar on the number and value of the deals made.  The result has been an impressive number of deals made with a record investment value of $291 million, an increase of 50% from 2020 and 82% up on the previous five-year average.

Record regional high deal values
The Asia Pacific private equity markets have in the last year set new records in the number of deals closed and exit values. Most notably, Japan, Southeast Asia and South Korea saw their dealmaking values double in 2021.  However, the best performers were undoubtedly China, accounting for 43% of the region’s deal value, and India, with an increased market share of 20%.

APAC assets under management
Abingdon’s investment analysts have reported that in the last quarter of 2021, APAC’s share of global assets under management had reached 30%. This is no surprise as the rate of growth in APAC PE investments has outperformed both the US and EU consistently over the last 10 years.  Throughout this period, APAC investments managed to grow 2.4 and 3.0 times faster that the US and Europe respectively.

50% of global unicorns
As has been the case for the last decade, companies in the fields of internet and technology have seen consistent interest amongst investors.  The number of APAC unicorns (private start-up companies with over $1bn) has grown fourfold over the last 5 years.  In 2021, there were 277 APAC unicorns, which represents a 61% increase on the previous year and accounts for more than half of the global total.  

Technology trades
So, which are the best performers? It will come as no surprise that the most ‘in demand’ investments are in the technology sector. Technology and internet companies generated 48% of the entire deal value. With most of the world forced to operate online over the last couple of years, the internet and technology have been at the forefront of development and on every investment manager’s wish list.

$650bn unallocated investment capital
After a three-year lull, fund raising has once again picked up. So much so, that APAC funds have hit an all time high, with over $650bn of ‘dry powder’ capital waiting for allocation.

Areas for caution
Although the region’s performance has been outstanding, Abingdon’s analysts have highlighted a number of areas for concern in the latter half of 2022. Firstly, the threat of more Covid-19 related lockdowns and travel bans and secondly the global effects of the invasion of Ukraine. Just as the world’s economies are starting to normalise, there is now the spectre of long-term global disruption and uncertainty.  

China’s PE market
As a result of China’s diminishing levels of economic growth and rising geopolitical tensions and ever tightening regulations, there is concern that the country’s PE market may decline.  Towards the end of 2021, APAC’s exit value slumped and there was a 50% drop in the value of IPOs from the previous year. China’s exit value dropped to 30% in the second half of the year.  Of course, if investors start to steer clear of China, India’s PE market could make gains.  India’s high rate of technology and digital penetration could be a big draw for APAC focused investors.

ESG Investing
As highlighted in the ‘ESG charts new highs among APAC investors’ insight by Ion Analytics, the focus on ESG compliant companies for APAC investors is accelerating. They report that in 2021, there was a ‘record-breaking value of ESG related merger and acquisition deals in the region’. The value of ESG deals reached US$69bn (China and India racked up the largest deal value totalling $42 billion and $11bn respectively) representing a 102%, an increase on their five-year average.

Since Covid, ESG issues are less on the periphery and now occupying a more central position in investment strategies. This has happened for a number of reasons, such as the change of investors’ mindset and the desire to identify long-term resilience and sustainability.  A desire for value-based investments amongst a younger demographic and also the recognition that ESG is the way forward for investment managers looking for higher long-term returns.

If you would like more information about global private equity market investments, contact Abingdon Global Investments at [email protected].