China tech groups to accelerate focus in South east Asia, Hong Kong accelerates digitization
According to KPMG’s latest Pulse of Fintech H1 2020 report, Asia Pacific saw USD 8.1 billion in total fintech investment in the first half of the year, with Southeast Asia notching the top two deals, namely the USD 3 billion funding round by Indonesia-based platform provider Gojek and an USD 886 million raise by its Singapore-based competitor Grab.
Fintech investment in the region was quite diverse from a regional perspective, with India (Navi Technologies: USD 398 million, Pine Labs: USD 300 million, PaySense: USD 185 million), Japan (Paidy: USD 251 million), South Korea (KSNET: USD 237 million), Australia (Airwallex: USD 160 million, Judo Bank: USD 147 million) and Indonesia (Moka: USD 130 million) all recording large fintech deals.
Southeast Asia saw strong fintech investment activity in the first half of 2020, as the largest fintech firms in Asia continued to gain ground, while smaller firms struggled in terms of profitability and attracting new investments. China technology groups meanwhile are expected to accelerate their focus in Southeast Asia moving forward, according to KPMG’s latest analysis.
While fintech investment activities in mainland China continued to decline, from USD 323 million across 37 deals in the first quarter to USD 285 million across 28 deals in the second quarter of 2020, the report notes this partly reflects the maturity of China’s fintech market, which is dominated by a smaller number of large players. Two of China’s mega-giants, Alibaba and JD.com held secondary listings in Hong Kong SAR in the first half of 2020, raising USD 11 billion and USD 3.9 billion respectively. The planned October dual listing of Ant Group in Hong Kong and Shanghai is expected to become the world’s largest IPO.
Andrew Huang, Partner and Fintech Leader, KPMG China, said: “China’s economy has recovered a lot from COVID-19, although it is still a tenuous situation. Many fintech businesses have been negatively impacted. This is challenging for some of the smaller fintechs due to the need for extra funding to manage cash flow – funding that is difficult to obtain.”
The report notes accelerated development of a digital renminbi in mainland China. In May 2020, a trial of the e-RMB was initiated in four cities, including Shenzhen, Suzhou, Chengdu, as well as a new area south of Beijing, Xiong’an. Chinese officials have also proposed the creation of a pan-Asian ‘stablecoin’ to improve cross border trade in the East Asia region.
Hong Kong SAR meanwhile introduced an ‘opt-in’ licensing program for Digital Asset Exchange, as well as made strides in the digitalisation of the ESG space, among other areas.
Barnaby Robson, Partner, Deal Advisory, KPMG China, commented: “We have seen ESG investment appetite grow in the US and Europe, and that trend is coming to Asia. A fintech ecosystem will emerge to meet the growing demand for robust ESG data, harnessing new technologies such as IoT, Big Data, AI and blockchain. Hong Kong is well-positioned to be a regional hub for this emerging industry, given its regional lead in securities trading.”
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