PAG and Warburg Pincus are stepping up investment in the Chinese market. Lower funding costs and gaps in company valuations are creating new buyout opportunities.
Jeffrey Perlman, CEO of New York-based Warburg Pincus, said at a conference in Singapore that China could maintain low interest rates for an extended period and that investment in the Chinese market should not be reduced or withdrawn. He also expressed the view that the low-interest-rate environment would make China favorable for buyout investment.
Meanwhile, a co-head of Hong Kong-based PAG said the firm is positioned to benefit from rising valuations when market conditions recover. Lower borrowing costs could enable up to 70% of an acquisition to be financed at a total cost of approximately 4%, potentially generating a 20-25% cash return.
PAG is one of Asia’s largest buyout investment firms, with assets under management reportedly exceeding $60 billion. The view was expressed that low interest rates and market restructuring would provide a tailwind for investment in China. Movements in the renminbi were also cited as a favorable factor.