SYDNEY/SINGAPORE, Jan 26 (Reuters) – China’s reopened borders and renewed efforts to boost the faltering economy have brightened their outlook, as banks began selling compound interest, acquisitions and investments affecting the world’s second-largest economy.
The prospect of a revival in deals comes as China’s policymakers try to restore confidence and growth in the private sector, which has been damaged by the COVID-19 pandemic and corruption.
While the consumer, retail and travel-related industries are expected to bounce back after being shut down for nearly three years, analysts say sectors related to boosting China’s economic prospects will be at the heart of this year’s performance.
“We’re looking at the technology, hard industrial technology, manufacturing, semiconductor sectors to look for jobs going forward,” said Mark Webster, partner and Singapore head at BDA Partners, an Asia-focused banking consultancy.
“Healthcare opportunities are showing interest, both at home and abroad, including in Southeast Asia,” he added. “On location, Indonesia in particular is attracting attention.”
Australia has already popped up on China’s radar as hopes for peace between the two countries fade. One such partnership, Tianqi Lithium (002466.SZ) and IGO’s (IGO.AX) commercial lithium miner Essential Metals.
M&A outflows involving companies in China halved last year to the lowest level since 2006, Refinitiv data showed, making Chinese companies the lowest in nine years.
China’s stock market fell 44% in the same period, according to Refinitiv data. The decline has reduced earnings for Wall Street banks and forced some of them to cut back on operations, particularly those linked to China contracts, in the past few months.
“We’ve had a lot of requests from companies in the past two to three weeks,” said Li He, a partner at law firm Davis Polk who traveled to Beijing to meet with clients the day China’s borders reopened on Jan. 8.
“This is not because of traffic but people think that reopening is good for the economy, good for the capital markets and good for business,” he said.
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Until the border reopened, travel from Hong Kong to China was strictly prohibited for three years – a major change for advisers whose weekend trips to China were common.
The open border could lead to a deal on business investment later in 2023 as businesses go to China to find buyers, according to Bagrin Angelov, head of China cross-border M&A at Chinese bank CICC.
China’s private sector investment was expected to total $24.1 billion in 2022, down from $57.8 billion a year earlier, Pitchbook data showed.
“Six months to a year before the deal, private equity firms have already started meeting with potential buyers to try to build interest and try to understand who might be interested,” said Angelov from Beijing.
“For them certainty is very important, and they need to meet consumers very early,” he continued. “Because of the opening, we hope to increase the foreign investment of Chinese consumers.”
Scott Murdoch reports in Sydney, Yantoultra Ngui in Singapore and Roxanne Liu in Beijing. Edited by Gerry Doyle
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