The last seven or eight years have been one long, rough ride for emerging markets investors, but the tide has now turned. At least according to one of the world's largest private equity firms.
Mr Ashish Shastry, KKR's head of South-east Asia, told a briefing yesterday: "Emerging markets have had a pretty tough ride since 2010, and it has made investors feel like the United States is a more solid bet, but our view is that emerging markets are turning around now."
For buyout firms, there is an opportunity here since many of the region's biggest businesses are also owned by families where decision-making has now fallen into the hands of their third-generation leaders, leaders who are either "less emotionally attached" to the family legacy or more attuned to thinking about the business in terms of what is "core" and "non-core", said Mr Shastry.
The same can be said for conglomerates that are looking to divest their non-core businesses; these may include government-linked conglomerates in Singapore and Malaysia.
Mr Shastry noted that he saw many good privatisation candidates among Singapore-listed companies, adding: "It means that I think you can pay premiums to take some of these companies private. Typical companies would be family-owned or entrepreneur- led companies, third generation. We're working on a couple of those opportunities at the moment."
Mr Shastry would not be drawn into details, but said his targets were firms with a market cap of up to $1.5 billion.
KKR has done deals here in the manufacturing and industrial sector. It acquired Singapore disk- drive component maker Unisteel Technology through a leveraged buyout in 2008 and invested in Singapore-based precision engineering firm MMI Holdings in 2007.
Mr Shastry believes Singapore stock valuations are "off the lows but we're far from the highs". For instance, "there are interesting opportunities available in Singapore. For example, the stock price performance and premium on Global Logistic Properties tells you that it was undervalued", he noted.
Shares of the warehouse owner have rallied more than 70 per cent since the news broke last November that it had attracted takeover interest from a Chinese investor group. Last Friday, the stock jumped 22 per cent in one day when the takeover offer was announced.
"So I think what it shows is there is value in the Singapore market," said Mr Shastry.
In South-east Asia generally, KKR likes consumer businesses and their derivatives, such as logistics and e-commerce, that grow as consumption grows, as well as healthcare and education. KKR closed its US$9.3 billion (S$12.7 billion) Asian Fund III last month.