PrivateEquityChina

US Investors Target Private Equity in Emerging Markets

More money going to private equity in 2005, investors say
January 25, 2006

More than half of international institutional private equity investors — 55% — expect to increase their allocations in the next 12 months, according to the winter 2005-2006 Global Private Equity Barometer by secondary private equity investment manager Coller Capital. Overall, 44% of the investors said they plan to increase their private equity allocations, compared with 30% who plan to raise their hedge fund allocations.

Also, 57% of North American investors expect to increase their private equity emerging markets allocations within the next three years, but only 16% currently invest in emerging markets. Specifically, investors said they are interested in India, Central and Eastern Europe, China, Hong Kong and Taiwan, Frank Morgan, head of Coller’s New York office, said in an interview.

CLSA Invests in Scud

ARIA Investment Partners II, a fund managed by CLSA Private Equity Management Ltd, has invested US$ 10 million in China's Great Speed Enterprises Ltd, a holding company of Scud (Fujian) Electronics Co Ltd.

Scud (Fujian) Electronics

• one of the largest mobile phone Li-ion battery makers in China
• has more than 200 wholesalers managing over 100,000 points of sale and covering all the provinces and large cities across China
• has been conducting independent research and development on batteries for notebooks as well as for other digital devices, such as PDAs and digital cameras since 2002

'Scud' is a strong and trustworthy brand with a leading market position. We hope that with our expansion capital, we will be able to assist the company to build on its already strong platform,' Alvin Ho, director of CLSA Private Equity, said in the statement.

Speaking from Hong Kong, Ho said that the size of the stake acquired had yet to be determined, although it would range from 10 to 20 pct.

KKR Hires Liu From Morgan Stanley to Lead China Private Equity

Kohlberg Kravis Roberts & Co., which is raising more than $10 billion for a new buyout fund, hired David Liu, the former co-head of Morgan Stanley's Asian private- equity unit, to lead its investment activities in China.

Liu will be based in Hong Kong, where he worked for Morgan Stanley, KKR said today in a statement. The New York-based firm in October named Deryck Maughan, former vice chairman of Citigroup, to oversee its expansion in Asia.

Liu ``is one of the most experienced private-equity investors in China with a terrific track record of identifying and investing in the emerging industry leaders,'' George Roberts, a KKR cofounder, said in the statement. '

Datang Intenational To Invest in Nuclear Power Plant

Datang International Power Generation Co. (0991.HK),  is to invest in a planned nuclear power plant expected to cost CNY23.44 billion.

Datang International

• the second-largest Hong Kong-listed Chinese power producer by capacity
• Datang's net profit in the six months ended June 2005 was CNY1.12 billion, up just 1% from CNY1.11 billion in the same period last year, despite revenue that rose 42% to CNY8.59 billion from CNY6.04 billion.

Ningde Nuclear Power Co

• The joint venture will have an initial registered capital of CNY200 million.
• 51% equity to be invested by Guangdong Nuclear Power Investment Co.
• 49% equity to be invested by Datang International Power Generation Co.
• located in Ningde city in Fujian province, and will have two 1,000-megawatt generating units.
• The developement proposal for the nuclear power plant has been submitted to the Chinese government for approval

Background

• All China's power producers have invested heavily in new power plants to meet the surging demand for electricity caused by rapid growth in industrial and consumer use.
• The Chinese government is promoting the use of alternative fuels to lower reliance on coal in power generation.
• Rising coal costs have eaten into the profits of power producers in China.
• Coal prices are expected to stay high in 2005, due to increasing demand for coal from new power plants, Beijing's crackdown on unsafe coal mines and the government's changes to the pricing system for contract purchases of coal.
• China aims to increase the share of nuclear power in its energy mix to 4% in 2020 from 1.6% in 2004, to diversify its sources of energy and lower air pollution. Though nuclear power plants have negligible fuel costs, concerns still linger over the high cost of building the complex facilities.Due to the higher capital spending required for nuclear power plants, the payback period of such projects tends to be six to eight years, longer than the two to three years for most coal-fired power plants, according to ABN Amro analyst Pierre Lau.

New Feature

We are adding book reviews as a new feature, check back in February for the first reviews.

If anyone has recommendations for publications to review on Private Equity or Venture Capital in China we'd be pleased to receive them.

H & Q Asia Pacific Raises US$500M for North Asia

H&Q Asia Pacific ("H&QAP") has raised $500 million for the north Asian region through its latest funds, Asia Pacific Growth Fund V, L.P. ("APGF V"), and H&Q-NPS Fund I. APGF V will generally invest in the North Asian markets of Japan, South Korea, and Greater China in later stage and larger-sized deals where it has either control or significant influence, while H&Q-NPS Fund I will adopt the same strategy focused solely on Korea.

Since its inception, H&QAP has managed 19 funds with an aggregate of $2.1 billion in committed capital. With the firm's recent successful exits in China (Amperex Technology Ltd.) and in Japan (GDH, formerly Gonzo Digimation Holding), APGF V builds on the success and experienced gained from prior H&QAP regional funds and leverages the firm's platform and seven-office network in the Asia Pacific region.

"With the proliferation of Asian funds in the market, we are appreciative of the support and confidence that our limited partners have vested in H&Q Asia Pacific, and we will work hard to deliver returns," said Dr. Ta-lin Hsu, founder and Chairman of H&Q Asia Pacific. "We are very excited about the investment opportunities across the Asian landscape and believe that we are well-positioned to take advantage of these opportunities," Dr. Hsu added.

2005 China Economic Statistics

The National Bureau of Statistics of China announced 2005 Economic Indicators.

In 2005, under the correct leadership of the Central Party Committee and the State Council, regions and departments at all levels further enhance and improve the macro regulatory control measures by centering on the scientific approach to development pushing forward reforms and opening-up. National economic growth shows good momentum of rapid increase, improved efficiency, mild rise of prices and enhanced vitality.

2005 China GDP: 18,232.1 billion yuan, up by 9.9% a little lower than 2004's 10.1%

2005 China Industrial Production up 11.4% 2005

2005 China Fixed Assets Investment up 25.7%, 0.9% lower than 2004.  In terms of different regions, the investment in the eastern part of China area is up by 24 %, that in central and western areas are up by 32.7 and 30.6 % respectively.

2005 China Domestic Market Sales are up 12.9%.  Sales of communication equipment is up by 19.9 %, household electric appliances and audio-video appliances increase by 14.8%, automobiles up 16.6%, and oil and oil products up 34.4%.

2005 China Foreign Trade: Total value of imports & exports up 23.2%, exports up 28.4%, imports up 17.6%

2005 China Trade Surplus US$ 101.9 billion an increase of US$ 69.9 billion over 2004 2005 Foreign Direct investment was US$ 60.3 billion, a drop of 0.5 %. The year-end foreign exchange reserves of China were US$ 818.9 billion, an increase of US$ 208.9 billion as compared with that at the beginning of the year.

2005 China CPI increase was 1.8%, price of food is up by 2.9 %, housing prices (rental?) up 5.4%, while the sale prices for housing in 70 large and medium cities increased by 7.6 %

I2005 China Disposable Income: urban households was 10,493 yuan, a real growth of 9.6%. The per capita net income of rural households is 3,255 yuan, a real growth of 6.2%

China Household Savings: By the end of 2005, the savings deposits of households amounted to 14.1 trillion yuan, an increase of 2.1 trillion yuan as compared with that at the beginning of this year.

2005 China Unemployment: The registered urban unemployment rate by the end of 2005 is 4.2%, maintaining the same level as in the previous year.

The above figures show that national economic situation is fairly good in 2005. In particular, the stability of economic performance is strengthened to some extent, and progress is seen in a more balanced development. All these have led to the consummation of the first five-year programme of economic and social development in this new century, and laid a solid foundation for the stable and fast growth of the economy in the new year as well as the eleventh five-year programme period. The key problems existing in current economic performance are: weak agricultural base, insufficient staying power for grain production and increase of rural household income; over-sized investment in fixed assets with irrational structure; and extensive mode of economic growth.

Looking into the year 2006, the global economic environment and domestic situation are encouraging. As long as we carefully implement the various policies set by the National Economic Working Conference, fully carry out the scientific approach to development, correctly handle the relationships among reform, development and stability and effectively deal with various difficulties and risks, the national economy will maintain the good momentum of stable and fast development.

Press release here

ipod prototype

IPOD  Prototype

Can we be sure Steve Jobs can take ALL the credit??

Images of China

This is pretty cool.... Images of an ever changing China and I made my own loop for Vomo Island Resort Fiji

The links  will take you to a web page where you can view the images or you can download a small player program to view the images more easily..... installing a program is a bit of a negative (excuse the pun)

The China photo loop wont allow it but I really liked the capability of allowing people to add their own photo's.  I have a great viral marketing idea which Im going to test out using FilmLoop over the next week.

My own loop for Vomo Island Resort Fiji took less than 5 minutes to put together.  Im an investor and actively involved in marketing real estate on Vomo. The development is small and exclusive and caters for the luxury traveller / investor.

for more information on Fiji Island Villas For Sale go here

tip of the hat to Guy Kawasaki who introduced FilmLoop to me

Top Ten Lies of Entreprenuers

Guy Kawasaki balances up his Top Ten Lies Lists with the top ten lies entrepreneurs make in presentations to VC's

(Guy cant be a numbers man though...last top ten list had 9 items, this one has 11.. or is that just balancing again... :-))

1. Our projections are conservative.
2. (Big name research firm) says our market will be $50 billion in 2010.
3. (Big name company) is going to sign our purchase order next week.
4. Key employees are set to join us as soon as we get funded.
5. No one is doing what we're doing.
6. No one can do what we're doing.
7. Hurry because several other venture capital firms are interested.
8. Oracle is too big/dumb/slow to be a threat.
9. We have a proven management team.
10. Patents make our product defensible.
11. All we have to do is get 1% of the market.

Lie (or delusion) number 11 can be the undoing of a venture heading into the China market. The fallacy is to take the market size (which is huge) and then 'forecast' acheiving just 1% market share (making the underlying assumtion that hitting 1% is going to be acheivable), they then multiply by unit price and bingo you got a hockey stick. This weak minded type of analysis totally overlooks the time, expense and difficulty of execution. Its all about the execution. This might apply to a start up or can equally apply to ventures entering the China market with an established brand, product or service.

If end purchasers just dont want the product then you'll never get even 1% of the market.

Some entrepreneurs get 'blinded' by the market sizing and jump over the vital steps of moving from concept/protoype to actual sales (or traction as our American friends like to call it).

Guy Kawasaki's post is here