JPMorgan Increases Asian operations

by Dave Nixon

Story link: JPMorgan Increases Asian operations

JPMorgan is increasing its Asian operations by taking in a Hong Kong-based private equity team and allocating $750m for them to spend in the area.

The funding is intended to double the bank’s annual expenditure on major investments in Asia-Pacific – which last year attained about $200m.

The 10-person team is an amalgamation from TVG Capital Partners, whose business will be wound down.

TVG had concentrated on the technology, communications and media sectors.

Nonetheless, future investments will envelop a much broader array of industries, with India and Japan in the midst of the targeted markets, according to someone familiar with the deal, which is scheduled to be announced on Tuesday.

The move shows JPMorgan’s capability to finance fresh investments at a time when several of its rivals have been obligated to call on sovereign wealth funds and other external investors to help buttress their balance sheets following enormous losses related to the chaos in credit markets. The Tier I capital ratio of JPMorgan Chase was 8.4 per cent at the end of December.

However it additionally indicates JPMorgan’s aspiration to draw alongside investment banks such as Morgan Stanley and Goldman Sachs that were faster to consign a considerable portion of their own money to Asia.

JPMorgan is escalating its investment capability as questions increase about Asia’s capacity to prolong to lead the world in terms of preliminary public offerings in the wake of the credit pinch.

Recent impedances have included an unsatisfactory stock market first appearance for the $3bn IPO of Reliance Power in India.

That tricky listing environment, according to someone close to the deal, might open fresh doors for principal investments by banks since many in Asia’s enormous pool of privately held or family companies will not progress with IPOs in the middle of such stock market instability.

However, JPMorgan’s future investments will almost definitely be restricted to minority stakes of between $75m and $100m that will not transport the bank into competition with conventional private equity firms, some of which have themselves developed into significant clients in Asia for banks such as JPMorgan.

Although its new investment team will not target financial services companies, JPMorgan is discretely scrutinizing closely any potential divestments in Asia by competitors that could be required to scale back in the region because of difficulties arising from the credit turmoil.