Chinese investors look to Europe for growth opportunities

When Li Ka-shing dangled more than £10 billion (HK$118.8 billion) in front of the owners of British mobile-phone operator O2 last month, some Chinese private investors may have been feeling rather smug about their own push into European markets.

Asia's most closely watched dealmaker has been attracting attention for what is seen by many as a sell-down of assets in Hong Kong and mainland China in favour of investments abroad, especially in Europe. Li's weighing up a partial disposal of port assets held by Hutchison Whampoa adds weight to this view.

However, a growing number of private equity funds in China have also sniffed out the trend. A key reason is the difficulty of pursuing their favoured exit strategy through an initial public offering in the country's stock markets, where more than 800 firms are queuing for listings.

Reform of the listing market is said to be a priority for regulators, involving a proposal to hand over the vetting of applicants to the stock exchange operators, as part of moves towards a more market-based system.

Investors are not holding their breath and a 14-month freeze on listings that ended a year ago is still fresh in the memory. Meanwhile, Europe remains a compelling destination for private equity cash looking to make the most of depressed values.

Liu Xuong, a managing director of management turnaround specialist Alvarez & Marsal, is one of the believers in the "growth story" of Europe, where economic output in much of the continent remains stagnant and jobless rates are stubbornly high. He said the backdrop of an economic slowdown at home provided further impetus for Chinese investors seeking better returns abroad.