Here are the China trends investors bet money on during a sluggish few months - CNBC

Summary

A factory in Suqian, Jiangsu province, China, on May 9, 2022. Future Publishing | Future Publishing | Getty Images

BEIJING — By the numbers, manufacturing companies in China snagged the most investment deals in the first half of the year among 37 sectors tracked by business database Qimingpian. In fact, the number of early-stage to pre-IPO deals in manufacturing rose by about 70% year-on-year despite Covid controls and a plunge in Chinese stocks during the last six months. About 300, or roughly a quarter of those deals, were related to semiconductors, preliminary data showed. Several of the investors listed were government-related funds. Data on early-stage investments aren't always complete due to the private nature of the deals. But available figures can reflect trends in China. Investor interest in chip companies comes as Beijing has cracked down on consumer-focused internet companies, while promoting the development of tech such as integrated circuit design tools and equipment for producing semiconductors. Manufacturing accounted for about 21% of investment deals in the first half of the year, according to Qimingpian. The second-most popular industry was business services, followed by health and medicine.

Electric car and transportation-related start-ups ranked first by capital raised, at 193 billion yuan ($28.82 billion), based on available data. Monetary amounts were not disclosed for many deals. "In the last 12 months I think that there's been a lot of hot capital chasing after a few deals that are in sectors that the government is promoting heavily," said Gobi Partners managing partner Chibo Tang, without naming specific industries. He said the trend has resulted in dramatic increases in valuation, while fundamentals haven't changed much. A two-month lockdown in Shanghai and Covid-related restrictions hit business sentiment and prevented people from traveling to discuss and close deals. In the first half of the year, the overall number of investment deals in China dropped by 29% from the same period a year ago, and declined by 25% from the second half of last year, according to CNBC calculations of Qimingpian data. “Given the market downturn in the recent months, there is a lot more capital on the sidelines," Gobi Partners' Tang said Monday on CNBC's "Squawk Box Asia." His firm expects more early-stage investment opportunities will arise in the next 12 months, as valuations drop. Tang noted how many start-ups that raised capital 18 months ago had growth forecasts that now are being reset lower. "Founders are having a more difficult time raising money," he said, "so the conversations we are having with them is how they should conserve capital, how they should extend their runway."

A factory in Suqian, Jiangsu province, China, on May 9, 2022. Future Publishing | Future Publishing | Getty Images

BEIJING — By the numbers, manufacturing companies in China snagged the most investment deals in the first half of the year among 37 sectors tracked by business database Qimingpian. In fact, the number of early-stage to pre-IPO deals in manufacturing rose by about 70% year-on-year despite Covid controls and a plunge in Chinese stocks during the last six months. About 300, or roughly a quarter of those deals, were related to semiconductors, preliminary data showed. Several of the investors listed were government-related funds. Data on early-stage investments aren't always complete due to the private nature of the deals. But available figures can reflect trends in China. Investor interest in chip companies comes as Beijing has cracked down on consumer-focused internet companies, while promoting the development of tech such as integrated circuit design tools and equipment for producing semiconductors. Manufacturing accounted for about 21% of investment deals in the first half of the year, according to Qimingpian. The second-most popular industry was business services, followed by health and medicine.

Electric car and transportation-related start-ups ranked first by capital raised, at 193 billion yuan ($28.82 billion), based on available data. Monetary amounts were not disclosed for many deals. "In the last 12 months I think that there's been a lot of hot capital chasing after a few deals that are in sectors that the government is promoting heavily," said Gobi Partners managing partner Chibo Tang, without naming specific industries. He said the trend has resulted in dramatic increases in valuation, while fundamentals haven't changed much. A two-month lockdown in Shanghai and Covid-related restrictions hit business sentiment and prevented people from traveling to discuss and close deals. In the first half of the year, the overall number of investment deals in China dropped by 29% from the same period a year ago, and declined by 25% from the second half of last year, according to CNBC calculations of Qimingpian data. “Given the market downturn in the recent months, there is a lot more capital on the sidelines," Gobi Partners' Tang said Monday on CNBC's "Squawk Box Asia." His firm expects more early-stage investment opportunities will arise in the next 12 months, as valuations drop. Tang noted how many start-ups that raised capital 18 months ago had growth forecasts that now are being reset lower. "Founders are having a more difficult time raising money," he said, "so the conversations we are having with them is how they should conserve capital, how they should extend their runway."

Here are the China trends investors bet money on during a sluggish few months - CNBC
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