Global investors cut exposure to China on rising risks

SINGAPORE – Global investors in private equity and venture capital funds say they are rotating away from China as clients are reassessing risks because of the country’s rapidly changing environment.

Investors are paring their holdings in the once-booming economy, despite their conviction that long-term growth will continue, according to speakers from Partners Capital, Hamilton Lane and others firms, which collectively invest billions of dollars across the region, at the SuperReturn Asia conference in Singapore on Tuesday.

The world’s second-biggest economy is at a critical juncture as economic pillars from technology to real estate face earnings pressure, regulatory scrutiny and difficulties in going public overseas. President Xi Jinping’s campaign for “common prosperity” – a slogan embodying his push to balance wealth distribution – along with the country’s stringent Covid-19 restrictions have dented growth, prompting investors to seek opportunities elsewhere in the region, including India.

“We represent people and they define the kind of risk they want us to take,” said Mr Emmanuel Pitsilis, managing director and co-head of Asia-Pacific at Partners Capital, at the conference. Even though the firm believes in the rise of China, “there’s been a rotation and a desire from clients to diversify away from China”, he said.

The firm has switched from a programme that is heavily weighted towards China and venture-oriented programmes to one that is much broader spread across different sectors and more geographically diverse, Mr Pitsilis said.

But the caution on China is not resulting in a retreat from Asia. For sovereign wealth fund GIC’s head of Asia for private equity, Mr Kevin Looi, the rotation away from China has helped highlight the region’s other giant: India.

“India has been a bit overshadowed by China historically, but if you look at the mood in India it’s very buoyant,” he said. “There are good reasons for that, a supportive government, good investment policy, India’s also benefiting from the realignment of supply chains.”

Singapore is also benefiting from the changes. The number of private equity (PE) firms in Singapore rose to 428 as at June from 336 at the start of 2021, according to Mr Ravi Menon, managing director at the Monetary Authority of Singapore.

He has also seen an uptick in India. “Last year, growth in PE, VC (venture capital) investments in India outpaced most major economies, including China,” he said. BLOOMBERG