Why Is Singapore’s GIC Broadening Its Investment Plans In China?

Why is Singapore’s GIC Broadening Its Investment Plans in China
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By G. Kalyan Kumar

Buoyed by successful investments in China’s flagship retail firm Alibaba Group Holding Ltd. and smartphone maker Xiaomi Corp, Singapore’s sovereign wealth fund GIC has expressed growing appetite for investment in China.

According to GIC’s top management, investment opportunities are so impressive in China that the company is giving it as much attention as US tech hotbed Silicon Valley.

Established in 1981, GIC Pte Ltd (formerly known as Government of Singapore Investment Corporation) is ranked as the world’s fifth-biggest state fund, with holdings of US$400 billion (S$526 billion).

Spotting the China Opportunity

Jess Delaney, head of data and research at the Sovereign Wealth Centre in London hailed GIC for spotting the China opportunity early on.

”China is becoming one of the most relevant ecosystems in the tech space,” Delaney said.

Thus far, GIC has made some crucially successful bets on China’s hottest tech companies. GIC was an early investor in Alibaba before its IPO came out in 2014, and Alibaba’s stock has since tripled.  GIC is also a backer of Xiaomi, which goes public this year with an estimated valuation of US$100 billion (S$131 billion).

“It’s so impressive in China that we give it equal attention in terms of our team,” said Jeremy Kranz, head of the technology investment group at GIC.

The Next Silicon Valley

Through its experience with Xiaomi, GIC’s management believes that China has enormous potential to become the next big innovation centre.

China’s tech ecosystem has matured well in terms of building consumer products, optimizing hardware and software, and running a complex supply chain. This is what companies require in delivering high-quality products at a lower cost, noted Kranz.

“We saw this for the first time at scale with Xiaomi,’’ he said.

Driven by their success with Alibaba and Xiaomi, GIC has furthered their tech investment to Chinese consumer drone maker DJI, electric unicycle maker Ninebot, and electric carmaker NIO.

GIC has also picked up stakes in China’s emerging grocery vendor Meituan Dianping – which delivers food, groceries and movie tickets – and news aggregator Toutiao.

Why is Singapore’s GIC Broadening Its Investment Plans in China

Rise in Tech, Media, Telecom Investments

According to estimates by the Sovereign Wealth Centre in London, GIC equity investments in technology, media, and telecommunications have jumped 20 percent in 2017, from a meagre 3 percent in 2009.

GIC currently has investments in over 50 tech companies spread across eight countries, with investments ranging from single-digit millions to single-digit billions. Although GIC refrains from investing in startups, partnership with Silicon Valley venture funds helps it bring promising companies on board.

While GIC is satisfied at the growing value from technology assets, it has a new focus on encouraging disruptive innovations as emerging platforms of investment where the potential to shape the future is high.

Reflecting on GIC’s success in picking smart companies with high growth potential in their early stages, Chief Executive Officer Lim Chow Kiat said the outcome is a reflection of the quest to identify game changers.

In for the Long Haul

Unlike other investors and venture capitalists, GIC employs a long-haul strategy in engaging companies for a complete life cycle by constant infusion of value beyond funding.

This approach was evident in Xiaomi. Beyond investing in the smartphone maker, GIC actively sponsors Xiaomi’s incubator ecosystem, which gave rise to many innovators including Ninebot and air purifier producer Mi. It also maintains involvement with Shunwei Capital, the venture capital fund run by CEO Lei Jun.

In the lookout for potential firms, GIC’s bottom-up strategy places a premium on entrepreneurs with exemplary execution skills who can rise above the constraints of themes or complex formulas.

“The weight is on finding the founders who discover something novel that people want to buy, as opposed to imagining a category and then finding someone in that category,” Kranz said.

Delving Into the Banking Sector

The tech sector hasn’t been GIC’s only successful venture. The company’s investment in India’s private Bandhan Bank has also been looking rosy. During its trading debut in March 2018, the Kolkata-based bank’s shares soared by 33 percent from its issue price of INR 375 (S$7.50). As of April 6, the bank’s share price was trading at INR 505.80.

GIC-affiliate Caladium holds a 16.7 percent stake in Bandhan Bank, and it is the second-largest shareholder in the bank after Financial Inclusion Trust’s 32.9 percent.

According to Choo Yong Cheen, chief investment officer of private equity at GIC, Bandhan’s journey from a microfinance institution to a respected bank and the evolution into a listed company has been delightful.

“We look forward to continuing our strong partnership and remain confident in Bandhan’s ability to tap the strong growth potential of India’s financial services sector,” Choo added.

Encouraging Ideas and Opportunities

GIC has also hosted events for spotting opportunities and accentuating exchange of ideas. One such example is The Bridge Forum, which was held in association with the Economic Development Board (EDB).

The forum brought together 45 companies and hundreds of executives from China, Singapore, Japan, USA, India, Korea, Australia and Indonesia, and showcased several new technologies in real estate.

GIC also offers support to Chinese investors who are keen on exchanging ideas and networking. In October 2016, GIC hosted 17 Chinese entrepreneurs and fund managers at its San Francisco office in the USA. The China Entrepreneurship Trip gave Chinese investors the opportunity to link up with Silicon Valley’s top venture funds and companies.

Views expressed in this article are the opinions of the author and do not necessarily reflect the views of Epoch Times.

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