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Asia-Pacific M&A deals plunge to lowest since 2009- report

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(Credit: Reuters) A man stands on an escalator in the financial district of Pudong in Shanghai November 20, 2013.
Pudong Financial District
December 13
9:58 PM 2013

The level of merger and acquisition deals in the Asia-Pacific region, excluding Japan, dropped to its lowest level in four years, the South China Morning Post reported. The plunge was caused by the slowdown in the energy and raw materials sectors.

Citing preliminary data from Thomson Reuters, the report said a 3.3% drop in domestic, outbound and inbound transactions is expected this year from the $527.5 billion generated last year. This was even if there was an increase in the domestic and cross-border deals in China.   

According to the report, the data indicates that investors have "shiftily snapped up real estate projects" which was most likely due to fears about the risk of inflation after China and Japan as well as the US bond-buying program brought about a credit-fuelled economic boost in the region.

Outbound deals that involved Asian companies fell 19% because of uncertainties in the economic activity. Last year, it was $175.3 billion but the figure dropped to $142.1 billion this year. Inbound transactions also dropped 16% to $127.9 billion. However, domestic transactions increased and made a recovery from $254.8 billion last year to $288.4 billion this year.

Property deals, comprising 17.9% of all, transactions, also posted an improvement from last year's 7%. A large part of the improvement was due to the spinoffs of Westfield's assets in Australia and New Zealand which was worth $14 billion. On the other hand, a decline was felt in the energy and power sectors which decreased 11%. The materials sector also went down 21% in the same period.

Companies in the mainland were able to capture 46% of the merger and acquisition market in the Asia-Pacific region continues to be in demand by buyers both locally and abroad. It bagged deals worth $191.4 billion. The $7.1 billion purchase of US-based pork producer Smithfield Foods by Shuanghui International was a reflection of the change in appetite by firms in the mainland for acquisitions abroad, the report said. 

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