Hong Kong's Investment Landscape: Navigating Geopolitical Challenges

Hong Kong's investment landscape is heavily impacted by escalating geopolitical tensions between China and the US, leading to a significant shift in global investor sentiment. Joseph Lang, CEO of DL Securities, in an interview with DealStreetAsia, reveals the challenges faced by local startups and fund managers.

• Fundraising Difficulties: These entities are struggling to reach their fundraising targets. Despite many being funded by US dollars, global investors perceive them as part of the 'China play' and are shying away.

• Changed Sentiment: In the past, investors worldwide were keen on acquiring a share of China's promising market. However, today's investors are wary, viewing China-related investments as high-risk due to intensified geopolitical tensions.

• Startling Statistics: According to Preqin, China-focused VC and PE funds have only raised $2B this year as of mid-August, a drastic decrease from $20.6B in 2022 and $49.3B in 2021.

• Alternative Funding Sources: Hong Kong fund managers are exploring alternative sources of US dollar commitments, including wealthy family offices that are willing to write smaller checks.

• Preference for Liquid Investments: Clients are showing a growing preference for more liquid investment options such as secondary buyouts, distressed investing, and private debt.

• Impact on Startups: Particularly, growth-stage startups are experiencing difficulties securing new investors following the retreat of global investors.

Lang concludes that, despite government initiatives to bridge the growth-stage funding gap, the journey to take startups from seed to growth remains arduous due to the uncertain geopolitical and economic future.