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Asia private equity deals set for worst Q1 since 2015, data shows

Asia private equity deals set for worst Q1 since 2015, data shows

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Asia private equity deals set for worst Q1 since 2015, data shows

 Private equity-backed mergers and acquisitions in Asia are set for their worst start to the year in nearly a decade, as a lull in dealmaking in China and broader economic and geopolitical uncertainties dragged on sentiment, data showed.

PE-backed M&A in Asia totalled $13.5 billion over January to March 19, down 32% from the corresponding year-earlier period, marking the worst first quarter since 2015, preliminary data from LSEG showed. That compares with a 21% rise in global PE-backed deals to $136 billion, it showed.

PE firms in Asia are sitting on record levels of dry powder, or unspent cash, but slowing economic growth, high rates, volatile markets and geopolitical tensions have curbed their investments and exits, and affected fund managers’ ability to raise new fund, consultancy Bain & Co said in its 2024 regional PE report published on Monday.

“Exits will have to happen,” Sebastien Lamy, Tokyo-based co-head of Bain & Co’s APAC PE practice, said. “The longer holding periods, aging portfolios – it’s not just putting pressure on returns, but it’s putting pressure on the ability to re-raise.”

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According to data provider Preqin, PE funds’ exits in Asia via IPOs, trade sales or secondary buyouts slumped 51% to $4.9 billion in the first quarter, the lowest since the first three months of 2014.

China’s lull was a key contributor to the regional PE-backed M&A decline, with such deals in the world’s No 2 economy nearly halving in the first quarter, LSEG data showed, as an economic slowdown and Sino-US tensions dampened investor appetite.

An index of semiconductors was also up sharply for the week amid continued optimism over artificial intelligence, but Keith Buchanan, senior portfolio manager at Globolt Investments.

Paul DiGiacomo, Hong Kong-based managing partner at investment bank BDA Partners, said a large portion of the global PE community were “really circumspect about investing” in China.

SIGNS OF RECOVERY

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Only $12.1 billion worth of capital via 28 funds was raised in the first quarter for Asia Pacific, Preqin data showed, the lowest quarterly value since January-March 2014. In the last five years, an average of 313 funds were raised every quarter.

Unspent PE capital in Asia reached $549 billion by June 2023, with unrealized value of assets funds have yet to sell totalling $2.3 trillion, both record highs, according to Preqin.

Signs of a recovery are, however, emerging with hopes of a pickup in the coming quarters, bankers and lawyers said.

Marcia Ellis, Hong Kong-based global co-chair of PE at law firm Morrison Foerster, said middle-market deals are happening, especially in Southeast Asia. Middle Eastern funds are also eyeing raising their percentage of assets in China, she said.

A number of funds are exploring potential privatisations of Hong Kong-listed companies.

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“People are signing up to run processes and processes are moving a little faster,” said BDA’s DiGiacomo. “Asset valuation expectations from buyers are getting more in line with those from sellers. I would expect M&A volumes to increase in 2024.” 

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Yellen pushes for joint G7 response to China industrial overcapacity

Yellen pushes for joint G7 response to China industrial overcapacity

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Yellen pushes for joint G7 response to China industrial overcapacity

 US Treasury Secretary Janet Yellen said on Tuesday that the United States and Europe needed to respond to China’s industrial overcapacity in a “strategic and united way” to keep manufacturers viable on both sides of the Atlantic.

Read more: China solar module exports shift towards Asia, which are up over 100pc for Pakistan

Yellen told reporters during a visit to Frankfurt that G7 finance ministers shared US concerns about Chinese efforts to dominate clean energy industries, but did not need “detailed coordination” on trade actions following the imposition of steep US tariffs on Chinese goods.

“But I do think that the concerns about China’s strategy are shared and all I’m suggesting is that given that many countries share this concern, it’s more forceful to communicate to China as a group,” Yellen said.

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In remarks on the US-European alliance in Frankfurt, Yellen said China’s excess industrial capacity threatened both American and European firms as well as the industrial development of emerging market countries.

Read more: Chinese EV maker BYD welcome to open factory in France: Minister

“China’s industrial policy may seem remote as we sit here in this room, but if we do not respond strategically and in a united way, the viability of businesses in both our countries and around the world could be at risk,” she said.

Last week, the Biden administration announced steep new tariffs on Chinese electric vehicles (EVs), solar products, semiconductors, battery parts, steel and other strategic industries.

Read more: China should hike import tariffs on large cars to 25pc, says research body

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Yellen had warned Chinese officials on a trip to Guangzhou and Beijing in April that the US would not accept their excess production of these goods that would flood global markets with cheap exports.

In remarks later at the TechQuartier technology and finance incubator in Frankfurt, Yellen said Chinese production in these sectors significantly exceeded global demand, threatening the development of clean energy industries around the world.

The Biden administration was taking action to protect US workers and firms from being undercut by “unfair Chinese economic competition”, she said.

Read more: US criticism of Chinese overcapacity rehashes ‘China threat’ rhetoric: Xinhua

She added that Chinese industrial capacity would be a focus of the Group of Seven finance meetings later this week in Stresa, Italy.

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“We want to see healthy green technology sectors, from innovative start-ups to green manufacturing factories, in the United States, Europe, and around the world, not just in China,” Yellen said.

FROZEN RUSSIAN ASSETS

Yellen, who received an honorary degree from the Frankfurt School of Finance and Management, said the European Union and other countries were taking similar actions to use their own authorities to investigate potential trade remedies for Chinese EVs and other products.

Yellen also said that it was important for the G7 countries to show that they had a plan to channel substantial aid to Ukraine from some $300 billion in frozen Russian assets.

Read more: With solar industry in crisis, Europe in a bind over Chinese imports

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She said that not every detail of the plan with a “completed term sheet” needed to be worked out by the time of the G7 leaders’ summit in Puglia, Italy, on June 13-15. But the plan needed enough agreement that leaders could seriously consider it.

Earlier, Yellen said the US and European Union should stand together against Russian aggression and Iranian “support for terrorism,” including agreeing on a way to unlock the value of some $300 billion worth of frozen Russian sovereign assets to aid Ukraine.

“That’s why I believe it’s vital and urgent that we collectively find a way forward to unlock the value of Russian sovereign assets immobilized in our jurisdictions for the benefit of Ukraine,” Yellen said. “This will be a key topic of conversation during G7 meetings this week.”

Yellen also is pushing for the G7 finance leaders to agree at their meetings this week on a plan to use the income stream from the frozen Russian sovereign assets to back a larger loan to Ukraine.

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Asia-Pacific real estate assets at ‘high risk’ from climate change: Report

Asia-Pacific real estate assets at ‘high risk’ from climate change: Report

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Asia-Pacific real estate assets at 'high risk' from climate change: Report

Nearly one in ten properties owned by leading real estate investment trusts (REITs) in the Asia-Pacific region may be at “high risk” of damage from climate change, particularly in coastal regions, a report published on Wednesday showed.

REITs, with an estimated global market capitalisation of about $3 trillion, are considered safe havens for long-term investors but damage from climate risks, such as floods and forest fires, could hurt valuations and boost insurance premiums, climate risk consultancy XDI said.

“What we are seeing is that the physical risks to build assets increase over time under climate change, and are particularly more pronounced in scenarios where global warming is allowed to accelerate,” said lead author Philip Tapsall.

Individual companies and communities that stood to be affected need to do more to adapt to the risks, he added. “We still have time to act, so what we are really trying to do is signal the existence of this risk.”

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Read more: Rangelands demise ‘severely underestimated’: UN report

In its report, XDI analysed more than 2,000 property assets valued totally at $142 billion held by the 20 largest REITs in Japan, Australia, Singapore and Hong Kong.

It used global climate models and regional weather data to assess the damage expected as a result of extreme weather.

Properties suffering annual damage of more than 1 per cent of their total replacement value were deemed “high risk”, with nearly one in ten expected to meet such criteria by 2050. XDI identified coastal inundation as the biggest threat in the Asia-Pacific.

Tapsall called for more transparency and disclosure to ensure that companies, their investors and lenders can measure and manage future climate impacts.

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“The worst thing that could happen is that there is a disorderly withdrawal of capital from vulnerable communities, so what we need is a clear articulation of the risk, and from there to think about the response.” 

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More gas tariffs hikes planned as Pakistan eyes another IMF programme

More gas tariffs hikes planned as Pakistan eyes another IMF programme

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More gas tariffs hikes planned as Pakistan eyes another IMF programme

As the International Monetary Fund (IMF) and Pakistan are currently involved in policy-level talks on the next loan programme, the authorities have proposed another round of gas tariff hike for different set of consumers, sources say.

With the aim of controlling the gas circular debt in mind, Pakistan have shared three plans with the Washington-based lender, the sources said, as the IMF – one of the Bretton Woods Institutions established in 1944 – isn’t backing down on its primary demand of reducing budget deficit.

The latest increase in gas tariffs will be applicable from August this year and affect not only domestic consumers but also fertilizer, cement and CNG sectors.

According to the sources, it is proposed that gas tariffs for both protected and non-protected domestic consumers should be increased by Rs100 to Rs400, depending upon their consumption.

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Read more: Pakistan sees 2024-25 inflation at 11.8pc, IMF thinks it will be 12.7pc

However, the government wants to keep the gas tariffs for tandoors unchanged as these serve the working class and other low-income groups.

Earlier, the PML-N government in Punjab reduced the roti prices, forcing the tandoor owners to sell 100 gram roti for Rs15 and fixed the naan [120 grams] price at Rs20 – a move which has been later replicated in other parts of the country too.

The three plans submitted by Pakistan are part of the overall talks revolving around the gas sector circular debt as well as the intended reforms.

Energy reforms for both gas and power sectors have not only been a main IMF demand but also suggested by the World Bank and other international financial institutions (IFIs).

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That’s why the two sides also held discussions on a dividend scheme to reduce the circular debt which is affecting the working of Sui Northern and Sui Southern – the two marketing companies responsible for gas marketing in the country.

Moreover, the sources also said that the two sides had agreed on data sharing with the IMF concerning arrears recovery, tariffs and tariffs at the latest.

Earlier, it was reported in media that the fertilizer companies did not pass on the benefits to the farmers after receiving billions in subsidies, as the IMF has been advocating for targeted subsidies so that the low-income groups are the beneficiates instead of big businesses.

It worth noting that the urea prices have been raised continuously in Pakistan, which adversely impacted the farmers by increasing the cost of production.

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