“This fund will have a China-Asean angle. We want to bring Chinese companies into Asean, and Asean companies looking to expand into China. We’re looking at the healthcare, technology and consumer sectors to start with,” says Fong.
The plan to set up the PE fund follows the group having signed a letter of intent with its parent company, China Galaxy Securities (CGS), in late May during the Asean Business Forum in Kuala Lumpur.
The fund is meant to invest in high-growth sectors in Asean such as healthcare, semiconductor, advanced manufacturing and renewable energy, among others, with Malaysia as a key regional anchor.
The PE fund launch forms part of a wider plan for Singapore-headquartered CGS International to grow its asset management business in Asean. The group aspires to increase its assets under management (AUM), including that under PE, to roughly $5 billion “in three to five years”, Fong says.
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“We have plans to grow a lot larger than where we are right now. Our current AUM is over $640 million, which we are working towards growing in both the private and public equity spaces.”
To achieve this, the group is open to the possibility of mergers and acquisitions (M&A) in the asset management sector. It currently has asset management licences in Malaysia, Singapore and Thailand.
“M&A is not out of the question,” says Fong. “I would say that we were looking [for targets], but we probably want to put it on the back-burner for this year because of the fact that there’s so much [market] uncertainty. But I think we will definitely be on the lookout next year, once the market settles down.”
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CGS International is wholly owned by CGS, one of the leading securities firms in China. CGS is a subsidiary of Central Huijin Investment, which, in turn, is wholly owned by China Investment Corporation, one of the world’s largest sovereign wealth funds, with AUM of US$1.33 trillion as at end-2023.
CGS International’s businesses are split into two specific buckets, says Fong. “One is what I call our BAU (business as usual) — our traditional business of brokerage and so on — and the other is our growth pillars, of which there are three: investment banking; asset management; and wealth management. These are the three big areas that we are going to place a lot of our focus on to grow, for the next three years,” Fong says.
The group has investment banking licences in Singapore, Malaysia, Indonesia and Thailand. In Malaysia, it is among the top players on the brokerage front. Year to May, it ranked number two by market share of total trading value in equities and number three by trading volume, Bursa Malaysia data shows.
Asked if CGS International is considering a listing down the road, Fong says: “That’s my preference, but Chinese regulations state that if the parent company is listed, the subsidiary may not be able to go for a listing. So, based on current regulations, it is unlikely that we can go for one. But, regulations may change over time, so we just have to watch this space.”
Strong deal pipeline, but timing is key
The group has a strong initial public offering (IPO) pipeline in Malaysia, Fong says. However, with recent market volatility following uncertainties around US-imposed tariffs and increasing geopolitical tensions in the Middle East, the timing for these deals coming to market is everything.
Malaysia has already seen a number of listings being delayed for a variety of reasons, she notes.
“In terms of the overall market, we expect Malaysia to be on track to hit its target of about 60 IPOs in 2025, despite the market volatility. We have four IPO mandates, which I think is pretty good considering the volatility,” she says, adding that all four are slated for the Main Market of Bursa Malaysia.
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But whether all four will be listed within 2025 remains to be seen. “I think that remains a question mark, because companies that do not need to go to the market quickly and can afford to wait, will probably do so in 2026, when there is a bit more uncertainty of valuation and of a successful outcome.”
Last year, there were a record high 55 new listings on Bursa Malaysia (11 Main Market, 40 ACE Market and four LEAP Market), compared with 32 in 2023. CGS International’s most recent deal in Malaysia was the June 10 Main Market listing of Paradigm Real Estate Investment Trust, which was the largest Malaysian REIT IPO in over a decade. It was the joint book runner and underwriter for the RM560 million ($169.1 million) IPO.
CGS International is also the financial adviser for the upcoming secondary listing of Singapore-listed UMS integration on Bursa Malaysia. UMS, an integrated high-precision engineering and manufacturing firm, is scheduled for a Main Market listing on Aug 1 by way of introduction — meaning, there would not be any funds raised for the company or its current shareholders.
As for M&A deals, Fong says there are a few prospective ones in Malaysia, including in the infrastructure and technology, media and telecommunications space. “There are two to three prospects in Malaysia that look interesting, but we will know only once we get to the term sheet [stage]. In Indonesia, we just closed one deal and I think another one will be closed, hopefully by the end of the year.”
Fong declined to elaborate on those deals. It is a question of “getting the right fit” when it comes to M&A, she says. “All I can tell you is that we’ve chased across the region, between 150 and 200 prospects.”
Given its Chinese parentage, CGS International has strong insight into the needs of investors in China. According to Fong, there continues to be strong interest from Chinese companies looking to acquire or partner with companies in Asean.
She points out that CGS has over 600 investment bankers in China, while in Asean, CGS International has close to 50 people. “We’re working very closely with CGS to look at potential targets [in Asean] for these Chinese companies to acquire or to partner with. One of the main themes that we are looking at really is technology- and consumer-focused Chinese companies with products that they want to expand into [Asean] countries and potentially looking for distribution points.”
Fong highlights the fact that, unlike previously, Chinese companies venturing into Asean are increasingly tapping the local supply chain. “In the past, when Chinese companies came to Asean, they tended to bring their own labour force, their own capital and supply chain … everything would be Chinese. This would sometimes lead to backlash because there’s the thinking that they come in and disrupt the local ecosystem. But now, in recent times, there has been a shift in mindset, because the Chinese recognise that they have to use the local ecosystem.”
Fong notes that there has been strong M&A activity this year in the broader Asia-Pacific (Apac) compared with other regions. Citing data from financial markets platform Dealogic, she says global M&A activity as of April this year was up 12.6% to US$984.38 billion. Interestingly, M&A volume in Apac jumped 92% while in the US, it tumbled 13%. In Europe, the volume was up by 7%.
Financial data firm Mergermarket recently reported that M&A in the Apac region reached a record volume of US$572 billion in the first six months this year (as at June 23), up 97% year on year. This was driven by the unwinding of several Japanese cross-shareholdings in Toyota affiliates and injections of capital into four Chinese banks, it said.
This story first appeared in The Edge Malaysia Issue 1582, July 7
