Asia’s Emerging Markets:

Opportunities for Investment

Ta-lin Hsu
H&Q Asia Pacific
May 6, 2007

Disclaimer: The views expressed in this presentation are the views of the speaker and do not necessarily reflect the views or policies of the Asian
Development Bank (ADB), or its Board of Governors, or the governments they represent. ADB does not guarantee the accuracy of the data included in
this paper and accepts no responsibility for any consequence of their use. Terminology used may not necessarily be consistent with ADB official terms
 H&Q Asia Pacific

z Migrated Silicon Valley-style VC to

Asia in 1985
z One of the earliest private equity
firms primarily focused on Seoul
investing in Asia Tokyo
Shanghai
z Superior performance over 22
years investing through several Hong Kong Taipei Silicon Valley
financial cycles in emerging Asian
markets
Manila
z Strong local presence with 34
experienced local investment
Singapore
professionals in 8 regional offices
z Over $2.2 billion under
management in over 362
companies since inception
 Venture Capital / Private Equity in Asia

Venture Growth
Buyout
Capital Expansion

Angel Early Growth Expansion Late Stage z LBO

Seed Stage Capital pre-IPO z Public to
Start-Up
Private
z Control
Stake

Asia’s Emerging Markets Asia’s Developed Countries

E.g. ƒ People’s Republic of China (PRC) E.g. ƒ Japan

ƒ India ƒ South Korea
ƒ Southeast Asia
 Benefits of Venture Capital to
Background
Emerging Markets

z Develops industries, creating new jobs and

opportunities
z Encourages entrepreneurship and innovation
z Repatriates talent and reverses the country’s
“Brain Drain”
z Accelerates R&D
z Increases financial and economic linkage to the
rest of the world
z Upgrades emerging market economies
 Global Impact of PRC & India
Background

Rise of PRC and India

z Size of economy can influence the global markets
z Both economies in an upswing cycle, driving lots of private equity
capital to Asia

Global impact on other Emerging Markets

z Foreign Direct Investment (FDI)
X Short-term: Significant drain of FDI away from other emerging markets
X Long-term benefits: More capital into the region means positive
spillover to other emerging market countries
z Trade and Economic Growth
X PRC and India’s emergence as dominant trading partners to the rest of
Asia reduces the region’s dependence on the U.S. and Europe
X Increasing trade liberalization policies
ƒ Helps promote regional economic integration
ƒ Reduce economic gaps in the region
 Opportunities for Investment
Background

z Cross-border migration of leading technology, brands and management

teams from more developed countries into emerging markets, taking
advantage of the positives while minimizing some of the risks
X Positives: low-cost labor, manufacturing and R&D, and ready-made
markets
X Risks: VC learning curve with local entrepreneurs, IP ownership and
protection issues, lack of transparency
z Leveraging valuation differences between stock markets
z Other than the obvious high-technology and consumer sectors,
opportunities for socially responsible investing exist in
X Clean technology
X Pharmaceuticals and medical devices (e.g. to develop cheaper medicine
and therapeutics for the treatment of AIDs and HIV)
Sectors that have a larger and lasting impact on emerging markets
beyond just profits
 Conclusion Background

z Venture capital and private equity are important to all

markets, in particular the emerging markets, as the
primary means of financing innovation to help develop
and grow the economies

z Due to sheer size and impact of PRC and India’s

economies, the long-term spillover effect will help bring
the other emerging market economies to the forefront
and leave an imprint for years to come

z Venture capital investments can have far-reaching

environmental and social impact on emerging market
countries, beyond just its effect on the economy