China records eight largest deals in APAC in Q3’20, driving VC investment recovery in the region, finds KPMG analysis

China records eight largest deals in APAC in Q3’20...

Investment in healthtech, eCommerce, AI and digital enablement will continue to pick up. Homecoming listing pipeline in Hong Kong and mainland China remains strong

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28 October 2020, Hong Kong – Venture Capital (VC) investment in Asia Pacific rebounded significantly in Q3’20 after two soft quarters of investment, reaching USD 21.1 billion, mainly driven by investment in China, according to KPMG analysis.

KPMG’s Venture Pulse Q3 2020 report finds that VC investment in mainland China amounted to USD 14.9 billion across 830 deals, up from 698 deals totalling USD 12.8billion in the second quarter. Asia Pacific as a whole saw USD 21.1 billion in investment across 1,285 deals in Q3’20 – up from USD 17.2 billion across 1,207 deals in Q2’20, led by a USD 1.5 billion raise by Shanghai-based automotive company Weltmeister and a USD 1.3 billion raise by India-based internet retailer Flipkart.

Egidio Zarrella, Partner, Head of Clients and Innovation, KPMG Chinasays: “Given the pandemic, geopolitical tensions, and other market challenges, what we may see for foreseeable future is more regionalization and more focus on localized investment. This is particularly true in Asia where Chinese tech mega-giants are making major investments in the region in order to fuel their continued growth and expansion.”

VC investment in mainland China rebounded in Q3’20, as the country continued to recover from the impacts of COVID-19. During Q3’20, China recorded eight of the Asia-Pacific region’s largest deals in Q3’20, namely the USD1.5 billion raise by Shanghai-based automotive company Weltmeister, a USD 830 million raise by JD Health, a USD 500 million raise by automotive company Xpeng, grocery delivery company Miss Fresh (USD 495m), edtech company Zhangmen.com (USD 450m), internet retail company Xiaohongshu (USD 450m), medtech company MicroPort Medical Robots (USD 432 million) and discount grocery company Yipin Shengxian (USD353m).

The pandemic continued to drive a significant boom in VC investment in health and biotech in Asia over the past couple of quarters. In addition to investment in areas such as testing and contact tracing, the pandemic also spurred investment in remote diagnostics, cancer screening, medical devices, online pharmacies, and even remote surgery. Edtech was also a booming sector in Asia in Q3’20, particularly in India.

Philip Ng, Partner, Head of Technology, KPMG Chinasays: “COVID-19 is driving a lot of investments in healthcare, accelerating innovations quite significantly even outside of virus-specific solutions. We are seeing rapid advancement in remote diagnostics and remote surgeries. Part of this is due to the development of 5G technology which is reducing the transmission delays. On the other hand, COVID-19 is having a significant impact on many businesses, particularly in retail and commercial real estate. We are expecting M&A to become quite common heading into the next few quarters as cashflow becomes a major challenge.”

US-listed Chinese companies have been shifting their attention to public markets closer to home, including the Hong Kong Stock Exchange. In Q3’20, Ant Group filed its IPO intent with the HKSE. If the IPO occurs, it is poised to become the largest tech IPO ever. During Q3’20, several US-listed Chinese companies moved to delist from US exchanges, including search engine Sogou, which is being taken private by Tencent in a USD 3.5 billion deal.

Irene Chu, Partner, Head of New Economy and Life Sciences, Hong Kong, KPMG China, says: “A lot of VCs are putting capital into supporting their existing portfolio companies. Part of the reason for this is because the capital markets in Hong Kong SAR and mainland China are actually going quite strong and a lot of companies are looking to file for an IPO over the next six to 12 months. So I think some of the investments we are seeing now being put into late-stage companies are really to pave the way for an upcoming IPO.”

 

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