The venture capital and private equity markets in Southeast Asia are undergoing a rapid evolution and expansion as 2014 provides markedly improved and attractive fundamentals for investors.
The broader Asia Pacific region is the second most attractive region for private fund investment (F1). Component to this, Southeast Asia’s attractiveness is being driven by (1) Regional heavyweights China and India experience decelerating growth and (2) China is struggling with reduced liquidity for its previously robust IPO market resulting from the restrictions to its share class local currency market 2013. Illustrating this is the leading indicator of foreign direct capital flows. In 2013, total FDI in the combined markets of Singapore, Malaysia, Thailand, Indonesia and Philippines surpassed China for the second time since 1997 (F2).
Figure 1. Regional PE Attractiveness
Figure 2. FDI: China vs ASEAN-5
Return expectations are also elevated with Asia outpacing the developed markets by return
expectations in the coming 3-5 year horizon (F3). The coincides uniquely with a rather large capital base of uninvested capital from institutional funds, corporate allocated strategies, and family offices (F4).
Figure 3. PE Earning expectations: Developed vs Emerging market
Figure 4. Unspent fund capital (Asian PE funds)