China slump drags down emerging markets fundraising

Trade disputes, bad debts in the financial system and a difficult exit environment for tech companies have affected investor appetite for China, according to EMPEA.

A fall in capital raising and deal activity in Asia’s largest private equity market has contributed to a two-year low across emerging markets, a report has found.

Capital raised for China-dedicated private capital funds, comprising private equity, venture, real assets, infrastructure and private debt, dropped 31 percent to $12 billion year-on-year in the first half of 2019, according to industry body EMPEA’s Mid-year 2019 Industry Statistics.

The overall value of private markets transactions in the country decreased 34 percent to $9.9 billion in the same period.

Overall emerging markets-focused private markets fundraising and investments in the first half reverted to 2017 levels as the majority of fund managers hit their final closes last year and uncertainty around trade tensions dampened investment activity, EMPEA noted. Capital raising decreased 10 percent to $31.9 billion and investments declined 32 percent to $26.3 billion compared with the previous year.

“A correction in private capital activity in China was perhaps inevitable after a record breaking 2018,” EMPEA senior director of research Jeff Schlapinski said in a statement accompanying the report. There are plenty of factors to give investors pause including trade frictions, bad debts in the financial system and difficulties for some of the largest private technology companies, he added.

Looking at individual markets, Africa had a revival in fundraising activity after two slow years with $1.6 billion raised. Amethis raised $425 million for its second growth fund and Partech collected $148 million for its debut Africa venture fund.

Deal activity in the Middle East and India continued to climb compared with the previous year, with fund managers deploying $1.1 billion and $6.5 billion, respectively in the first half of the year.

Despite positive sentiment for South-East Asia, private capital deal volume fell to its lowest in the last four years. Capital raising and deal activity also slowed in Central and Eastern Europe during the period

Africa, emerging Asia, CEE and the Commonwealth of Independent States, Southeastern Europe as well as Russia, Latin America and the Middle East are the regions covered in EMPEA’s report.