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China's CICC sees opportunity in Brazil, possible office

NEW YORK : Securities firm China International Capital Corp sees increased opportunities in Brazil for cross-border deals and may consider opening an office in the country, Lindsay Lin, CICC’s Head of Americas, said in an interview at the Reuters NEXT conference in New York.

China is Brazil’s largest trading partner, however Chinese investments in Brazil fell 78 per cent in 2022, the Brazil-China Business Council (CEBC) said in August.

“We believe that more Chinese investment will be willing to … invest into the Latin America region, especially in Brazil,” said Lin. She said CICC “might consider” opening an office in the country.

Lin said CICC identified real opportunities during a recent trip to Latin America as the region provides “rich natural resources, which actually is a great complement to China.”

In the U.S., where CICC opened a New York office in 2007, providing services for corporate finance and equities as well as research, Lin said clients are particularly interested in insights on China’s economy, where CICC forecasts growth of 5.3 per cent in 2023.

The International Monetary Fund on Tuesday forecast that continued weakness in China’s property sector and subdued external demand could restrict GDP to 4.6 per cent in 2024.

Troubles in China’s highly indebted property sector, including Country Garden the nation’s biggest private property developer and giant China Evergrande, have sparked fears of a broader financial crisis.

“For investors and creditors, you should never believe a company is too big to fail,” said Lin, although she added the risk was under control as the Chinese government had been monitoring the situation in the sector.

Lin said she hoped for a return to greater deal volumes. The total value of global announced M&A deals in the first three quarters of 2023 was a 27 per cent drop according to LSEG. Deals where a U.S. acquirer bought a company in China fell by 20 per cent, LSEG data shows.

“This year is very quiet,” Lin said, referring to M&A.

The fall comes against a backdrop of a more tense U.S.-China relationship. U.S. President Biden in August signed an executive order that will prohibit some new U.S. investment in China in sensitive technologies.

“We should leave the investment to the business people to decide,” Lin said. “I don’t remember when politics got so involved in daily business,” Lin said, reflecting on her 21 years in business.

Initial public offerings (IPOs) of Chinese companies in the U.S. are also far off highs. As of early November, Chinese firms had raised about $400 million via U.S listings so far this year, above levels of $100 million this time last year but a fraction of the over $12 billion in 2021, according to LSEG data.

New York had for decades been prized as a listing venue for Chinese companies, however a disastrous listing in mid-2021 by ride-hailing company Didi Global prompted a regulatory backlash.

However, there were still Chinese companies listing here, said Lin and China’s securities regulator China Securities Regulatory Commission had pre-approved 20 Chinese ADRs.

“So 2024, we’re still positive, and we still hold the hope of things will (be) getting better in terms of relationships, in terms of business activities,” Lin said.

To view the live broadcast of the World Stage go to the Reuters NEXT news page: https://www.reuters.com/world/reuters-next/

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