00:00Frank, what's your view on China's investment climate and environment?
00:05Has it changed materially?
00:07I feel a lot more positive in the last 12 months than I felt, say, three years ago.
00:14I think overall the Chinese companies have gone through so many stress testing in the last five, six years.
00:21And the companies that we're working with now are definitely strong, resilient, and have adapted themselves.
00:28And our portfolio companies also have weathered the storms and now is not only recovering but also growing nicely.
00:37So I feel pretty good about it. Capital markets obviously have improved with Hong Kong IPOs.
00:42It's not directly relevant for us because we haven't exited that much through the Hong Kong market.
00:47We have a lot of companies we buy that we are also going through selectively some trade-offs process.
00:54But we definitely see the M&A market also starting to become more active.
00:58Are you concerned about the headwinds?
01:00I mean, we talk about slowing growth.
01:02We talk about geopolitical tensions escalating.
01:06Are some of those, I guess, factors likely to impact sentiment?
01:11I think every year there's never a dull moment.
01:14There's always some news.
01:17We are still talking about trade war, geopolitics, as we talk about it during COVID, after COVID.
01:25But I think right now everybody felt life needs to go on.
01:31Every company just needs to focus on what they can control.
01:34And that includes not only growing the R&D, growing their innovation, understand the consumer market and do it better there, but also internal efficiency as well.
01:47So we spend a lot of time with our portfolio companies on internal efficiency improvement.
01:50What are you seeing in terms of global LP appetite for, you know, China-focused PEs?
01:56Is that improving?
02:00Gradually.
02:01I would say it also, so four or five years ago, there's a question whether China is investable.
02:08And two, three years ago, a lot of our LPs started to come back to China to visit, to understand what's going on.
02:17And I think the mood is definitely improving.
02:21Also, it depends on which geographic region the LPs are coming from.
02:26And that may also affect how they view about the, you know, the potential of investing further in this market.
02:34But have you been surprised by, I guess, the reversal in sentiment from uninvestable to perhaps being quite attractive?
02:43I think the innovation that's been happening in the last, or has been known to the world, has been quite impressive, right?
02:54And, you know, last year during this time in Davos, nobody saw DeepSeq was coming.
03:00And we saw the whole life science sector in China taking off.
03:05And those are just two examples.
03:08Also, I think the Chinese consumption, despite it's not growing as fast to contribute to the GDP growth, it's still very resilient.
03:15There's a vast market.
03:16So we're very bullish about the Chinese consumption, for example.
03:19And we think there's just going to be more potential.
03:21You acknowledge the very, I suppose, strong IPO market in Hong Kong.
03:26Of course, it was the top performer when it came to IPOs last year.
03:31Yeah.
03:32You've said before that, you know, the Hong Kong IPO market is not an attractive way to exit.
03:38Have you had a change of heart on the back of that?
03:41I'm not sure if I describe it that way.
03:44We are a buy-all focus fund.
03:48So IPO is not the only way for us to exit.
03:50So we often look at the M&A market for exit.
03:55But the Hong Kong market is a good market.
03:57Is it more attractive now that it's doing so well?
04:01It is definitely so.
04:02The liquidity is high.
04:04And we do have some portfolio companies that are listed in the Hong Kong market.
04:08The valuation certainly has significantly improved.
04:10So we're happy about that.
04:11And I do see investors are coming back to Hong Kong.
04:15I think this Hong Kong stock exchange is doing a great job.
04:19And I think there are more exits.
04:22I think for investment community as well as the regulators,
04:25everybody realized that the more exits,
04:27you're actually attracting more capital to come back.
04:31In the next 12 to 24 months, how are we looking at investing?
04:35I mean, what's looking attractive right now?
04:37We feel that the valuation overall is actually quite reasonable for the primary market,
04:46i.e. the private equity market and the venture capital market right now
04:49is entering into a quite reasonable valuation range for us to look at.
04:56The companies after the last few years of stress testing
05:00are also at the stage we feel more comfortable underwriting as well.
05:06So I think across different sectors,
05:11we have been particularly focusing on consumer products and consumer services.
05:16We're looking at both Chinese, indigenous, local companies,
05:20also international companies that we believe have a strong potential.
05:25Industrial products and services is another area of focus.
05:29We do believe there's a huge upgrade demand in the China market as well.
05:33And how does Europe fit into that strategy?
05:34Europe is, I feel, overall here is somewhat challenged.
05:41And I think they should definitely look east.
05:44Asia represents a big demand market, also a source of innovation.
05:49I do believe that European companies should do very well if they embrace the Asia market,
05:55if they also think about how to co-innovate in the local markets in order to become adapted
06:03and also be very, very competitive.
06:07And in addition to just the local market in Asia, they have the global market.
06:11So the global purchasing power will add up to be a competitive advantage as well.
06:18So that's one of the playbook that we have in terms of helping European companies to expand into the Asia market.
06:26And Frank, the biggest risk, don't say geopolitics, is it?
06:32What is the biggest risk?
06:33Geopolitics is certainly one thing.
06:36Whether or not inflation can be curtailed?
06:39I mean, what might it be?
06:40I think overall inflation is not yet in China or in Japan or other markets has been a big concern yet.
06:51I think growth driven by consumption is something we need to focus very much on.
07:00And right now, there is overall a lack of significant job growth, which will stimulate more confidence in spending.
07:13So this is one area that we feel we need to watch.
07:18The real estate weakness in China is dampening that mood in the past.
07:25We hope that in 2026 it will stabilize and that will help overall.
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