Investment

China VC slump is set to drag Asia-Pacific fundraising down to a decade low

Published

1 year ago

July 26, 2023

BEIJING — China-focused venture capital and other private investment funds have had a slow start to the year and are set to drag down Asia-Pacific fundraising to the lowest in 10 years.

That’s according to a second-quarter update Thursday from Preqin, an alternative assets research firm. Alternative assets include venture capital, but not publicly traded stocks and bonds.

“Given the ongoing economic uncertainties and geopolitical tensions related to China, investors continue to maintain a cautious stance,” Angela Lai, vice president and head of APAC and valuations, research insights, at Preqin, said in a statement.

“We currently don’t see investors returning in large numbers to add allocations specifically to the China market.”

China’s economic rebound from the pandemic has slowed in recent months. Challenges for the venture capital world go back further.

The fallout around Didi’s U.S. initial public offering in the summer of 2021 and increased regulatory scrutiny from the U.S. and China paused what was once a thriving international investment trend.

The U.S. is also considering restrictions on investment in the most advanced Chinese technology.

China-focused venture capital funds raised $2.7 billion in the second quarter, a drop of more than 50% from the first quarter, Preqin said. That dragged down overall VC fundraising in Asia-Pacific to $4.5 billion in the second quarter, the lowest in at least five years, the report said.

“Any time you add an additional element of regulatory risk, or the government may shift gears and change course, you’re adding more risk to the equation than the average venture capitalist wants to take,” said Andrew J. Sherman, Washington, D.C.-based partner at Brown Rudnick.

Still, “no sophisticated U.S. investor thinks they can make all their money just investing in the U.S.,” he said, noting firms are still looking for opportunities in China and India to maximize returns.

Preqin’s analysts still see “China’s economy as holding the key to a full recovery” in Asia-Pacific given “its broad range of investment opportunities and deep capital markets, and significant influence as the top trading partner for many APAC countries.”

In China, new rules for private investment funds are set to take effect Sept. 1, with a stated goal of “guiding” venture capital investment for long-term investment in “innovative startups.” That’s according to a CNBC translation of the Chinese.

Falling valuations

In private equity, China-focused funds are having an “even more challenging time” this year, Lai said, adding that in 2022, they raised just under 12% of what was raised in 2021.

China-focused private equity firms’ assets under management also declined for the first time in at least five years, Preqin said, noting it was “a development worth monitoring.”

Lai said it’s a result of new capital coming in more slowly than the firms are liquidating existing investments — and if those investments’ valuations decline.

Reflecting a global trend in falling valuations, China-based fashion startup Shein raised $2 billion in the second quarter — but at a valuation of $66 billion versus $100 billion just over a year ago, Preqin said.

Going to Japan

Money is meanwhile flowing to Japan.

Asia regional funds have grown their share of APAC private equity fundraising in the second-quarter, with Japan-focused Advantage Partners raising the largest amount at just under $1 billion, Preqin said.

Japan had the highest private equity deal-making in Asia-Pacific for two straight quarters, while deals in greater China dropped by more than 55% in the second quarter from the first, the report said.

We expect an increasing focus on advanced technologies across APAC as the technology race between China and the US intensifies.

Preqin

“This market is often perceived as lower risk, with relatively stable, albeit sometimes lower, returns. The depreciation of the Japanese yen against the US dollar has further added to its appeal to foreign investors, particularly real estate investors.”

Notably, U.S. billionaire Warren Buffett increased investments in Japan this year.

In other Asia-Pacific deal activity in the second quarter, Preqin noted Japanese and South Korean private-equity backed deals in semiconductors and the electric car supply chain.

“We expect an increasing focus on advanced technologies across APAC as the technology race between China and the US intensifies,” the report said. “This will catalyze more investments along these value chains, implying that opportunities for private investors could arise.”

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Investment

Tesla shares soar more than 14% as Trump win is seen boosting Elon Musk’s electric vehicle company

Published

7 days ago

November 6, 2024

Anne Joseph

NEW YORK (AP) — Shares of Tesla soared Wednesday as investors bet that the electric vehicle maker and its CEO Elon Musk will benefit from Donald Trump’s return to the White House.

Tesla stands to make significant gains under a Trump administration with the threat of diminished subsidies for alternative energy and electric vehicles doing the most harm to smaller competitors. Trump’s plans for extensive tariffs on Chinese imports make it less likely that Chinese EVs will be sold in bulk in the U.S. anytime soon.

“Tesla has the scale and scope that is unmatched,” said Wedbush analyst Dan Ives, in a note to investors. “This dynamic could give Musk and Tesla a clear competitive advantage in a non-EV subsidy environment, coupled by likely higher China tariffs that would continue to push away cheaper Chinese EV players.”

Tesla shares jumped 14.8% Wednesday while shares of rival electric vehicle makers tumbled. Nio, based in Shanghai, fell 5.3%. Shares of electric truck maker Rivian dropped 8.3% and Lucid Group fell 5.3%.

Tesla dominates sales of electric vehicles in the U.S, with 48.9% in market share through the middle of 2024, according to the U.S. Energy Information Administration.

Subsidies for clean energy are part of the Inflation Reduction Act, signed into law by President Joe Biden in 2022. It included tax credits for manufacturing, along with tax credits for consumers of electric vehicles.

Musk was one of Trump’s biggest donors, spending at least $119 million mobilizing Trump’s supporters to back the Republican nominee. He also pledged to give away $1 million a day to voters signing a petition for his political action committee.

In some ways, it has been a rocky year for Tesla, with sales and profit declining through the first half of the year. Profit did rise 17.3% in the third quarter.

The U.S. opened an investigation into the company’s “Full Self-Driving” system after reports of crashes in low-visibility conditions, including one that killed a pedestrian. The investigation covers roughly 2.4 million Teslas from the 2016 through 2024 model years.

And investors sent company shares tumbling last month after Tesla unveiled its long-awaited robotaxi at a Hollywood studio Thursday night, seeing not much progress at Tesla on autonomous vehicles while other companies have been making notable progress.

Tesla began selling the software, which is called “Full Self-Driving,” nine years ago. But there are doubts about its reliability.

The stock is now showing a 16.1% gain for the year after rising the past two days.

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Investment

S&P/TSX composite up more than 100 points, U.S. stock markets mixed

Published

4 weeks ago

October 16, 2024

Anne Joseph

TORONTO – Canada’s main stock index was up more than 100 points in late-morning trading, helped by strength in base metal and utility stocks, while U.S. stock markets were mixed.

The S&P/TSX composite index was up 103.40 points at 24,542.48.

In New York, the Dow Jones industrial average was up 192.31 points at 42,932.73. The S&P 500 index was up 7.14 points at 5,822.40, while the Nasdaq composite was down 9.03 points at 18,306.56.

The Canadian dollar traded for 72.61 cents US compared with 72.44 cents US on Tuesday.

The November crude oil contract was down 71 cents at US$69.87 per barrel and the November natural gas contract was down eight cents at US$2.42 per mmBTU.

The December gold contract was up US$7.20 at US$2,686.10 an ounce and the December copper contract was up a penny at US$4.35 a pound.

This report by The Canadian Press was first published Oct. 16, 2024.

Companies in this story: (TSX:GSPTSE, TSX:CADUSD)

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Economy

S&P/TSX up more than 200 points, U.S. markets also higher

Published

1 month ago

October 11, 2024

Anne Joseph

TORONTO – Canada’s main stock index was up more than 200 points in late-morning trading, while U.S. stock markets were also headed higher.

The S&P/TSX composite index was up 205.86 points at 24,508.12.

In New York, the Dow Jones industrial average was up 336.62 points at 42,790.74. The S&P 500 index was up 34.19 points at 5,814.24, while the Nasdaq composite was up 60.27 points at 18.342.32.

The Canadian dollar traded for 72.61 cents US compared with 72.71 cents US on Thursday.

The November crude oil contract was down 15 cents at US$75.70 per barrel and the November natural gas contract was down two cents at US$2.65 per mmBTU.

The December gold contract was down US$29.60 at US$2,668.90 an ounce and the December copper contract was up four cents at US$4.47 a pound.

This report by The Canadian Press was first published Oct. 11, 2024.

Companies in this story: (TSX:GSPTSE, TSX:CADUSD)

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