Spot­light shines on out­boundM& A

China Daily (USA) - - BUSINESS - By CAI XIAO caix­iao@chi­

Chi­nese in­sur­ers are mak­ing over­seas in­vest­ments for steady re­turns and to pre­vent ex­change rate risks, ex­perts said.

Chi­nese out­bound merg­ers and ac­qui­si­tions hit a record 493 deals worth $134.3 bil­lion in the first half, ac­cord­ing to a Price­wa­ter­house­Coop­ers re­port in Au­gust.

“The dra­matic growth in out­bound M&A deals is sup­ported by the rise of al­ter­na­tive fi­nan­cial in­vestors, such as the in­vest­ment arms of in­sur­ers, large cor­po­ra­tions and State-owned en­ter­prises,” said Ge­orge Lu, PwC China trans­ac­tion ser­vices part­ner.

Lu said Chi­nese com­pa­nies in­clud­ing in­sur­ers sought ad­vanced tech­nol­ogy, knowhow and brands. They looked fa­vor­ably on low val­u­a­tions of some over­seas as­sets to make prof­its.

Steven Lam, life in­sur­ance an­a­lyst at Bloomberg In­tel­li­gence, said Chi­nese in­sur­ers may ac­cel­er­ate their over­seas in­vest­ments for ex­change rate con­sid­er­a­tions.

Lam said their over­seas in­vest­ments re­main far be­low the reg­u­la­tor’s thresh­old of 15 per­cent of as­sets, mean­ing at least 1.8 tril­lion yuan ($272 bil­lion) can be de­ployed, as­sum­ing only 2 per­cent of the in­dus­try’s as­sets were in­vested abroad.

“Chi­nese in­vestors have been fa­vor­ing com­mer­cial prop­er­ties in the US and in Europe for their sta­ble re­turns and as­set du­ra­tion,” said Lam. “But af­ter Bri­tain voted to leave the EU, China’s in­sur­ance com­pa­nies may slow their prop­erty in­vest­ment in Lon­don’s fi­nan­cial cen­ter.”

Lam said Chi­nese in­vestors may hold off in­vest­ments in Lon­don and re­assess prospects and val­u­a­tions amid un­cer­tainty in the la­bor mar­ket and de­pre­ci­a­tion of the pound ster­ling.

Ac­cord­ing to data com­piled by Bloomberg In­tel­li­gence, large Chi­nese in­sur­ers in­vested about $2.4 bil­lion in Lon­don real es­tate last year, com­pared with about $2.8 bil­lion in the US, mainly in New York.

Wang Yao at in­ter­na­tional real es­tate con­sul­tancy com­pany Sav­ills said Chi­nese in­sur­ers dom­i­nated out­bound real es­tate in­vest­ments in the first quar­ter, ac­count­ing for 80 per­cent by value. Their pro­por­tion in the full year of 2015 was 60 per­cent.

“Be­cause of en­cour­ag­ing poli­cies and steady re­turn of real es­tate in­vest­ments, more and more in­sur­ance com­pa­nies are go­ing abroad,” said Wang.

Chi­nese in­sur­ers will pay at­ten­tion to as­set safety, in­vest­ment re­turn, po­lit­i­cal sta­bil­ity, and the trans­parency of laws and reg­u­la­tions, he said.

Wang said the trend will con­tinue as Chi­nese in­sur­ers’ as­set al­lo­ca­tion in real es­tate sec­tor is still small based on in­ter­na­tional prac­tices.

Lam said Chi­nese in­sur­ers also seek their coun­ter­parts in South­east Asia and fin­tech as­sets around the world.

China Life In­suranceCoand Brook­field Prop­erty Part­ners an­nounced in April that they jointly ac­quired Aldgate Tower in Lon­don for 346 mil­lion pounds ($452.3 mil­lion).

China’s An­bang In­sur­ance Group an­nounced in April that it bought Al­lianz Life In­sur­ance Korea and Al­lianz Global In­vestors Korea for more than $3 mil­lion.

A spokesman for An­bang said in­March that the com­pany has an am­ple over­seas in­vest­ment quota for this year.

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