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Asian private equity industry suffers as fundraising falls 85 per cent from 2001

Asia appears to be suffering an even more extreme slowdown in private equity activity than the US and Europe, according to the latest figures from the AVCJ. Funds raised totalled just $544m in the first half of 2002, 85 per cent down from £3.9bn in the same period last year.

Investments were also down, with funds investing $5.1bn, 33 per cent less than $7.7bn in the first half of 2001.

Buy-outs accounted for 75 per cent of the total investments made by Asian private equity investors, and the South Korean buy-out market was the most popular destination. Some 36 per cent of the total invested went there. Other notable markets are Japan, Australia, Hong Kong and Indonesia. Despite growing interest in mainland China over the last year, investment there remained relatively low at just $175m.

There appeared to be little movement in terms of industry sectors, with Asia retaining its name for low-cost manufacturing. More than 40 per cent of investments were in manufacturing companies, although the telecommunications and financial services industries are also popular targets.

But there was some grounds for optimism, said the AVCJ's publisher Scott Thoreau, as a handful of successful exits have been reported this year.

‘Despite the sobering statistics, many regional players remain bullish about the Asian market and see the consolidation as an opportunity to bring sanity back to the market.' Exits such as the H & Q Pacific consortium's sale of Good Morning Securities have reportedly brought in substantial returns.

As elsewhere, the private equity industry in Asia has been suffering since the first signs of slowdown in the public markets in 2000. But the relative immaturity of the sector in Asia appears to have made it even more vulnerable to global conditions.

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