The Emerging Markets Private Equity Association’s H1 2019 statistics, released last week, show changing dynamics across China and South-East Asia.

Last year’s capital raising momentum in China was not replicated during the first half of 2019, when private capital fundraising in the country fell by 31 percent to $12 billion year-on-year. Deal-making activities in China also fell by 34 percent to $9.9 billion, year-on-year, as of the end of June.

Fundraising activity is measured based on the region or country in which fund managers intend to invest. Investment activity is based on the country headquarters of an investee company.

According to Jeff Schlapinski, a Washington DC-based senior director of research at EMPEA, the China correction might have been expected after such robust activity in the country’s private capital markets in 2018. He said international trade tensions and bad debts in the domestic financial system were among the factors that might be giving investors pause.

The report divides private capital investment into three areas – private equity, private credit, and private infrastructure and real assets.

The $1.4 billion of fundraising seen in South-East Asia as of the end of June already exceeds 2018’s total figure of $1.1 billion.

In terms of strategy, venture capital has emerged as the most active investment area for LPs to gain exposure in South-East Asia. Of the $1.4 billion raised in the region, $331 million targeted venture capital. The report showed that nine venture capital or venture debt funds held closes during the first half of the year.

According to the 2019 Global Limited Partners Survey, released in May, South-East Asia was last year ranked as the most attractive market for investment over the following 12 months. However, the region was perceived by 38 percent of the survey’s respondents – 104 LPs from 37 countries – to have a limited number of established fund managers, and 22 percent of the LPs surveyed believed the scale of the investment opportunity was too small.