Europe could see its investment allocation moving East as record levels of investment are expected to continue to flow into the Asian markets
US investors pumped $20bn into Asian non-performing loans and distressed assets over the last 18 months, doubling the $10bn invested over the previous corresponding period, says Ernst & Young.
According to Jack Rodman, managing director of Ernst & Young’s Asia Pacific Financial Solutions practice: “About $10bn of the record $20bn was invested in acquisitions of portfolios of non-performing loans, $3bn in direct real estate investments, and $7bn directly in banks, insurance companies, real estate operating companies, and businesses.”
European markets may suffer as US investors switch their attention. A recent report by American company Institutional Real Estate said that many US funds want to double their foreign holdings over the next two or three years. But they are shifting their focus from UK and western European companies to Japan, Hong Kong and South East Asia.
The recovery of Asia’s economies and progress in financial system reform, the accelerated sale of property assets and corporate debt, and the explosion of e-commerce are giving US investors the confidence to increase their stakes in the region, said Rodman.
“The stage is set for the rapid growth of US and other foreign investment in Asia – not only this year but for many years to come,” he added.
E&Y said that US and other foreign investors will find a “major real estate play” in the rapid growth of e-commerce in Asia as proceeds from the sales of some of the Asian governments’ and banks’ $1.5tr mountain of non-performing loans and property assets allow Asian companies to develop the e-economy.
Ernst & Young said that the next big market to open up – probably this summer – will be Indonesia, where the country’s Bank Restructuring Agency controls over $80bn in distressed assets including trophy hotels and other high-quality real estate.
China will be the next opportunity. The country’s four largest banks control an estimated $100bn in non-performing loans and assets. “And Taiwan, the Philippines and Vietnam are all planning new initiatives to attract more foreign investment starting next year,” said Rodman.
Meanwhile, Frankfurt-based DTZ Zadelhoff says that Asian office markets have stabilised and foreign investors are starting to return to the region. In Shanghai, China, 393,500m2 of new space was taken up last year, a rise on 1998’s total of only 275,000m2.
In Singapore, office demand is rising as the economy recovers with banks, financial services, IT and telecoms companies leading those requiring most space. Liberalisation of the banking sector has led to foreign banks increasing their presence in the country, says DTZ.
