TPG positive on investment in China

As the price of Chinese companies drops, the global private equity firm TPG Capital has grown increasingly positive about investment opportunities in the country.

According to David Bonderman, founding partner of TPG, economic conditions in Asia are stronger than in the rest of the world and the valuations of Chinese companies before IPO have become increasingly attractive compared with 2010 and 2011.

The company is interested in investment opportunities in Sichuan province, he said on Wednesday.

This follows a first close in February of its two China funds, the TPG Shanghai RMB Fund, backed by the Shanghai municipal government and the Pudong New Area government and the TPG Western China Growth Partners I fund, supported by the Chongqing municipal financial services office and Chongqing Lianjiang New Area Development and Investment Group.

Both funds launched in August 2010 and are joint ventures with local governments, but of the 4 billion ($635 million) raised in the funds, 90 percent came from private investors rather than government-linked entities.

TPG, which manages about $51.5 billion in assets, has investments in a number of Chinese companies, including China International Capital Corp, Li Ning Co Ltd and Shenzhen Development Bank.

While Bonderman is optimistic about investment opportunities in China and has considerable experience of investing in the country, he remains cautious. "Investing in emerging markets today demands that you are ready to deal with the unexpected," he said.

His caution may be reflected in a slowdown in Chinese companies going public. Weak economic conditions and accounting scandals among some US-listed Chinese companies have meant that just 24 Chinese companies went public overseas in the first half of this year, down almost 50 percent year-on-year, according to data from the Beijing-based Zero2IPO Research Center.

In total, 104 Chinese enterprises listed on Chinese mainland stock exchanges in the first half of the year, compared with 167 that held IPOs at home in the same period last year.

Hong Hao, managing director and chief strategist at BOCOM International Holdings Co Ltd, wrote in his July report that market sentiment was cautious.

"With banks continuing to be de-rated it is difficult to see a recovery in market valuations, especially at a time when liquidity remains tight," he said.