Emerging market private equity investors still drawn to China- FT

January 25
4:19 PM 2014

Private equity investors will still continue to be drawn to China, the Financial Times blog beyondbrics reported. Paul Fletcher of private equity firm Actis told Peter Vanham of beyondbrics, "The environment in the market place in China will be at least as positive if not more."

This is despite the fact that consumption in China comprises only 35% to 38% of the GDP growth and infrastructure only accounts to nearly 50%, according to Sev Vettivetpillai of Abraaj, a private equity investor, that has assets under management amounting to $7.5 billion across emerging markets.

Fletcher explains why. He said, "We're long term investors. Cyclical events, or the lack of them, matter more than immediate GDP or consumption growth."

Because China holds a long-term vision and has the means to put its plan to action, the view of emerging market private equity investors is good news for the country. However, it does not bode well for countries like India and Brazil that apparently do not have long-term perspective and are battling stability issues. While Actis has had a long history in India, Fletcher said he is "neutral about India, wanting to be positive." He is also cautious about Brazil, the report said.

The report said the predictions about the emerging market slowdown next year is simply a source of "background information" for private equity investors. Vettivetpillai said "GDP growth figures are tailwinds, they add to your thesis. You don't base your investments on GDP growth." Fletcher holds the same view. He said, "You can do good investments in low growth countries."

As far as this view holds, private equity investors can find good news even in the midst of the poor performance of some emerging markets. For instance, the weak South African rand makes buying South African firms less costly, the report said. 

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