© Reuters. FILE PHOTO: An empty area is pictured in Lujiazui financial district, as coronavirus disease (COVID-19) outbreaks continue in Shanghai, China, December 19, 2022. REUTERS/Aly Song
By Scott Murdoch, Yantoultra Ngui and Roxanne Liu
SYDNEY/SINGAPORE (Reuters) – China’s reopened borders and renewed focus on boosting the sagging economy have brightened the deals outlook, with bankers starting to field interest for mergers, acquisitions and fundraising involving the world’s second-largest economy.
The prospect of a revival in deals comes as Chinese policymakers try to restore private-sector confidence and growth, which has been ravaged by the COVID-19 pandemic and a sweeping regulatory crackdown.
Although consumer, retail and travel-related firms are expected to bounce back after an almost three-year lockdown, advisers say sectors linked to strengthening China’s economic prospects will be at the centre of dealmaking this year.
“We see strategic sectors, hardcore industrial technology, automation, semiconductor-related to be a focus for outbound activity,” said Mark Webster, partner and head of Singapore at BDA Partners, an Asia-focused investment banking adviser.
“Healthcare opportunities are proving of interest, both domestically and outbound, including in Southeast Asia,” he added. “Geographically, Indonesia in particular is attracting a lot of attention.”
Australia has also already emerged on China’s radar amid hopes of a diplomatic thaw between the two countries. In one such deal, Tianqi Lithium and IGO’s joint venture are bidding for lithium miner Essential Metals.
Outbound M&A involving companies in China halved last year to the lowest point since 2006, Refinitiv data showed, which pulled total Chinese company-led dealmaking to its lowest point in nine years.
Chinese companies’ capital markets deals slipped 44% in the same period, according to Refinitiv data. That slump crimped the fees earned by Wall Street banks and forced some of them to cut jobs, mainly those linked to Chinese deals, in the past few months.
“We have had a lot more requests for proposals from companies in the past two to three weeks,” said Li He, a capital markets partner at law firm Davis Polk who travelled to Beijing to meet clients the day after China’s border reopened on Jan. 8.
“That is not just because of travel but people think that a reopening is good for the economy, good for capital markets and good for deal execution,” He said.