Asia has been the location of numerous landmark secondaries deals, from Warburg Pincus’s 2017 strip sale to the spinout of Standard Chartered Private Equity. Dealflow has generally been lumpy, however, and the region’s contribution to global transaction volumes stays around the 10 percent mark.

This year could be different. There steady dealflow in all sub-sectors of the market, and across countries and asset classes as well.

In February, Temasek subsidiary Vertex Holdings closed a $500 million GP-led deal and there are at least three $1 billion-plus transactions edging towards completion, Secondaries Investor understands. These include a process on GLP China, one of Asia’s largest logistics and distribution firms, which could be as big as $2 billion. In early August, China’s Ping An Insurance was seller in a $680 million credit secondaries deal, the largest yet in that asset class.

In the mid-market, Huagai Capital, Legend Capital and Buhuo Ventures are among the firms to have closed GP-led deals, Secondaries Investor reported. Just in the past month, Asian secondaries specialist NewQuest Capital Partners has participated in direct secondaries deals involving hospital chain Kids Clinic India and the operator of KFC in India, Sapphire Foods, and led a $450 million process on Navis Capital’s 2009-vintage fund.

“The Asian market has seen between $7 billion and $8 billion of GP-led secondary dealflow over the past 12 months, which is significantly higher than the prior 12-month period,” said NewQuest’s chief operating officer Bonnie Lo.

Recent actions by the Chinese government have cast a grey cloud over this dealflow. Over the summer, it introduced regulations that banned education providers from making profits or raising capital. In July, the government threatened to fine ride hailing business Didi for data breaches, hitting the share price of the newly listed company. More such actions are expected, according to several sources in Asia.

Could this stop 2021 being a record year for Asian secondaries? Maybe. As noted by one managing director at an advisory firm, most secondaries funds do not have to invest in Asia. “If an investment committee in New York is looking at software deals in the US or Europe versus one in China, with everything happening in that market… You have an idea of which one they’d back,” the MD says.

However, China is only one piece of the market. Two of the largest GP-led deals in market are on Korean companies, while portfolio sales from Australian superannuation funds should help bolster the numbers. And while in the short-term these policies will impact valuations, there may be long-term benefits.

“There are sectors where there has been overexuberance in terms of capital raised and maybe an unhealthy level of competition between companies. It’s not unhealthy to have a bit of a correction with some of those valuations,” says another adviser based in Hong Kong.

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