35 Asian Legal Business | January-February 2025 There’s an increased focus on assets benefiting from domestic consumption in China, particularly consumables and healthcare-related products. “Consumption-related businesses, assets with less exposure to tariffs and export control regimes, and with the potential to expand within the Chinese market, were more attractive to investors in the current climate,” explains Oliver Nip, a Hong Kong-based partner at U.S. law firm Ropes & Gray. Firms are also identifying offshore businesses that could benefit from China’s potential economic rebound while maintaining geographic diversification. “Such ‘China ex-China’ strategies also include targets that can diversify an investor’s geographic footprint (through organic growth or bolt-on acquisitions), with expanding into Southeast Asia being a common theme,” Nip adds. China still offers attractive investment opportunities in the domestic consumption markets, owing to muted valuations and less international risk, but funds are reluctant to pull the trigger, choosing rather to wait and watch as uncertainties associated with the Trump presidency play out. In the meantime, dry powder piles up, and there is an urgent need to find deployment vehicles in other parts of Asia. “Countries like India, Vietnam, Indonesia, and Malaysia are increasingly viewed as attractive alternatives, offering strong growth potential, favourable demographics, and a relatively stable regulatory environment,” Srivastava says. This movement is particularly evident in sectors less exposed to geopolitical risks, such as domestic consumption, healthcare, and technology. Infrastructure and social infrastructure sectors are also expected to grow, with particular interest in data centres and energy transition assets. But the reallocation of PE investments across Asia represents more than just a reaction to China’s slowdown – it’s a strategic recalibration that recognises the diverse opportunities across the region. While China remains an important market, fund managers are increasingly adopting a more balanced approach to portfolio allocation. However, regulatory and financial uncertainty - typical in emerging markets - particularly related to investment entry and exit, means investors are expressing caution before plunging into these highgrowth markets, which has resulted in a significant cooldown in dealmaking across the Asia-Pacific region. Legal experts say that success in this evolving landscape requires a nuanced understanding of local markets, regulatory frameworks, and risk factors. PE firms that can effectively navigate these complexities while building strong local partnerships are likely to find significant opportunities in Asia’s emerging markets. Indonesia: The rising star Indonesia’s emergence as a prime investment destination is no coincidence. The country’s private equity market alone is projected to reach a deal value of $6.68 billion by 2025. Strong economic fundamentals, along with a young and techsavvy population, have created ideal conditions for PE investors. Specifically, the e-commerce market is expected to reach $59.34 billion by 2025, with an annual growth rate of 7.52 percent. “Additionally, the healthcare and renewable energy sectors are gaining traction, driven by rising demand for quality healthcare services and the government’s commitment to sustainability,” Kleute says. “Indonesia’s middle class is demanding higher-quality products and services, which presents opportunities for PE firms to invest in sectors such as healthcare and consumer goods. These factors indicate a positive outlook for PE investment in Indonesia in 2025,” adds Daniel Pardede, senior partner at HHP Law Firm, Baker McKenzie’s partner firm in Indonesia. However, the archipelago’s strengthening economic ties with China may expose it to Trump-led financial embargos. China and Indonesia have signed business deals totalling more than $10 billion and agreed to strengthen cooperation in lithium batteries and other key sectors, following President Prabowo Subianto’s meeting with Xi Jinping in Beijing during his first foreign trip since inauguration. Prabowo’s “friends-with-all” strategy may face challenges in the U.S. if the Trump administration pressures Indonesia to take a clearer position on Beijing’s regional ambitions. However, PE/VC
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