China's outbound M&A likely to stabilize in H2: Natixis

More deals in July and improved offshore financing indicates more outbound activity for the period.

Chinese companies may pursue more overseas acquisitions in the H2 amidst a slowing local economy and increasingly low return of assets in China, according to a research by Natixis.

Newly announced acquisitions in July indicates that the number of M&A deals by Chinese companies may rise in the second half of the year, in contrast to the trend of decreasing transactions recorded in Q2 and H1, Natixis noted. For example, the automobile company BAIC has just acquired a 5% stake in Daimler, a German automotive corporation.

Another reason for the foresight in outbound M&A is the improvement of offshore financing by a dovish FED. Although trade tensions have increased restrictions, dealings with EU stands to have more leeway.

EU-27 is still the main target acquisition by China, followed by countries in Asia Pacific and the US. Before Russia topped the value deals of China, EU-27 accounted for about one-third of China’s value deals in cross-border acquisitions in H1, and which largely came from the completed stake purchase in Finland’s Amer Sports.

The EU remains to be the most important target of China’s investments in the industrial sector and is also starting to attract Chinese corporates’ attention in the consumer sector.

Looking forward, Chinese companies would reportedly prefer to invest in the information and communications technology, as well as the industrial and consumer sectors as these are aligned with the government’s strategic objectives.