Panel: China slowdown won’t hurt global PE

GPs at an industry conference this week were bullish on markets in Southeast Asia and Latin America despite slowing growth in China. 

China’s slowing economic growth is not expected to have an adverse effect on private equity markets in countries such as Cambodia, Vietnam or in Latin American territories like Mexico and Peru.

That’s according to a panel conversation at the Emerging Markets Private Equity Association’s Global Private Equity Conference in Washington DC this week.

“China is an increasingly important exporter of Vietnam, but it is such a small portion of exports that I don’t expect a slowdown to affect our economy,” Chad Ovel, a partner at Mekong Capital, said at the conference, which was also hosted by the International Finance Corporation. Mekong invests in Vietnam-based consumer driven businesses.

However, rising wage costs could potentially affect Vietnam, as well as Indonesia, according to Teresa Barger, a managing director at emerging markets asset manager Cartica Capital Management.

“Thailand is also ‘iffy’ now,” she said at the conference. “But Laos and Cambodia will be affected less, as frontier markets.”

Though 1.6 percent of Mexico’s exports go to China, Mexico does not export a significant level of commodities to the country and is expected to remain relatively isolated from China’s slowing growth, according to Eduardo Michelson Delgado, chief executive officer at Latin America-focused Kandeo Private Equity.

The case is the same for Colombia, Mexico and Peru, which export low levels of resources such as copper and gold to China.

“We’re very bullish on the three economies,” Delgado said at the conference.

Within China, private equity investors don’t see the slowdown as having a detrimental impact on the asset class in.

“China is, within Asia, the most dynamic and the most significant private equity market,” Rebecca Xu, co-founder and managing director at Asia Alternatives Management, said at the conference. “There is no return of the golden years and the low-hanging fruit, but within this lower level growth there are a lot of opportunities in the underlying sectors and geographies.”

Benjamin Fanger, co-founder and managing director at Chinese distressed investor Shoreline Capital agreed.

“I think there is huge opportunity in China right now,” he said. “I don’t really care if the GDP ends up being 4, 5 or 6 percent.”

China’s gross domestic product grew at rate of 7.7 percent in 2013, according to data from the National Bureau of Statistics China, down from 7.8 percent in 2012 and 9.3 percent in 2011.