Digital banking set to attract more investments into M’sia

KUALA LUMPUR: The recent advancements in Malaysia’s digital banking sector, which saw five consortiums obtaining digital bank licences, are set to attract more foreign investors to the country.

Usman Akhtar, partner and head of Bain & Company’s Private Equity practice in Southeast Asia, said digital banking is poised to attract investors, similar to other global markets.

“Digital banking has attracted investment interest in multiple markets, and we can assure you that there is no shortage of investors who are excited about digital financial services.

“Digital banking would be an investable theme in the future, and we must keep an eye out for it,” he told a questionand-answer session during a media briefing on the Bain and Company Southeast Asia Private Equity Report 2022 yesterday.

Over the years, the Internet and Technology sectors accounted for the lion’s share of deal volume and value across the larger Asia Pacific PE landscape.

Within Southeast Asia, the digital economy continues to roar ahead as tech-centric investment remains to be dominant in Indonesia (60 per cent of deal count) and leads growth in both Singapore (50 per cent of deal count), and Vietnam (55 per cent of deal count).

Other sectors like healthcare and financial services are beginning to take noticeable share as investing targets, representing 18 per cent and 9.0 per cent of deal count, respectively.

Commenting on the private equity trend in Malaysia, senior advisor to Bain’s Global Private Equity business Suvir Varma said in contrast to Singapore, Vietnam, and Indonesia, private equity activities in Malaysia are less active, though it continues to attract foreign investments.

“We continue to see occasional transactions in the consumer product space, precision engineering logistics, and ecommerce facilitated logistics centre, but investors see more attractive growth-oriented investment opportunities in other Southeast Asian markets,” he added.

According to the Bain & Company’s 2022 annual Southeast Asia Private Equity (PE) Report released today, Southeast Asian private equity investment deal value stood at US$25 billion in 2021 versus an average of five years, with Singapore rising 108 per cent, followed by Indonesia (surging 310 per cent), Vietnam (gaining 91 per cent), while Malaysia (contracting 7.0 per cent).

On overall performance, the Southeast Asian Private Equity market had one of the most impressive turnarounds in its history, with deal value reaching an all-time record high of US$25 billion – more than doubled the 2020 figures.

The previous year had seen a significant slowdown, with the market recording the largest fall across all Asia Pacific markets due to travel restrictions hampering dealmaking and diligence processes, but the progressive opening-up of countries in the second half of 2021 helped drive a rebound in deal value.

Akhtar said Southeast Asia as a region has bounced back strongly from the Covid-19impacted year in 2020, with the 2021 activity level showing that investors were keen to make up for a lost time.

Asia Pacific now makes up over a quarter of the global PE market and in 2021, surging investor confidence in Southeast Asia resulted in the largest growth in the deal volume of any country in APAC and was only behind Japan in deal value growth.

Digital banking has attracted investment interest in multiple markets, and we can assure you that there is no shortage of investors who are excited about digital financial services. Usman Akhtar