According to the latest institutional data, in the first half of this year, the total investment in China's equity investment market exceeded 3,600, with a total investment scale of nearly $65 billion, down from the same period last year. In the investment industry, many sub-sectors represented by new energy and high-end manufacturing are favored by capital, and the investment scale is in the forefront.

According to industry insiders, in recent years, the private equity market is facing good development opportunities, and the level of service entity economy is constantly improving. Looking forward to the second half of the year, the investment and financing market is expected to continue to pick up, and the investment enthusiasm of enterprises in high-end manufacturing, energy storage and other industries that conform to the inherent demand of high-quality development may still be at a high level.

Total equity investment declined slightly in the first half of the year.

Overall, compared with the same period of last year, the size of equity investment market in the first half of this year has declined. According to the report 'China's Equity Investment in the First Half of 2022' released by KPMG in China recently (hereinafter referred to as 'the report'), the total investment in China's PE/VC market in the first half of this year was 3,610, down 21% from the same period of last year; In terms of investment scale, the total investment scale of the market was USD 64.6 billion, down 6% compared with the same period of last year.

'It is expected that as the macro economy continues to repair, the investment and financing market is expected to continue to pick up in the second half of the year.' Wu Fuchang, co-managing partner of China's KPMG private equity industry, told the Economic Information Daily that with the gradual control of the epidemic and the successive introduction of a series of steady growth policies, the market confidence has been picking up, and the domestic economy has also entered the repair channel. The latest data shows that the investment and financing market has rebounded in June, and the investment amount has increased by 62% compared with May.

In the field of fund-raising market, the head aggregation effect is further highlighted. According to the statistics of the report, the newly established funds under USD 100 million account for 88%, but the total funds account for only 12%, which is 4% lower than that of 2021; The number of funds with more than $5 billion accounts for only 0.2%, but the amount accounts for 23%, up 3 percentage points from 2021.

In terms of exit channels, A shares became the main way for equity investment institutions to exit IPO in the first half of the year. According to the data, in the first half of the year, A shares accounted for 92% and Hong Kong stocks accounted for 8% of the transactions that were withdrawn through IPO. No successful companies withdrew from the US stock market. Among them, 35% and 34% of the invested enterprises listed on Science and Technology Edition and Growth Enterprise Market, respectively, have become important exit channels for invested enterprises.

Active investment in multiple segments

At the industry level, although the total investment in the first half of the year decreased relatively, investment activities in high-end manufacturing, semiconductors, energy storage, clean energy and other fields remained active.

Top ten industries and investment amount of equity investment in the first half of 2022

Source: Investment data, KPMG analysis.

According to the report, the top five industries with equity investment in the first half of this year are IT and information technology, medical and health care, manufacturing, energy and mining, and Internet, accounting for 22%, 17%, 12%, 11%, and 8% respectively. In addition, in the first half of 2022, a total of 397 'specialized and innovative' enterprises received different rounds of investment, compared with only 284 last year. From the perspective of industry distribution, semiconductor chips (50), high-end manufacturing (47) and mechanical equipment (41) are favored by capital.

'At the present stage, China's industry is in a critical period of transformation and upgrading. On the one hand, the optimization and adjustment of industrial structure has been accelerated, and the strategic emerging industries with higher technical content, high-end manufacturing and modern service industries are accelerating their development, which has driven China's industries to shift from low-end to high-end industries; On the other hand, the new development concept has been fully implemented in enterprises, and green and low-carbon development has become the conscious pursuit of enterprises. ' Liu Xingguo, a researcher at the Research Department of china enterprise confederation, told the Economic Information Daily that equity investment funds are also following this trend of industrial evolution and actively increasing their investment in industrial transformation and upgrading.

'Despite the overall slowdown of the equity investment market in the first half of the year, the investment in high-end manufacturing, blockchain, battery and energy storage technology, clean energy and other sub-sectors all achieved positive growth, with year-on-year growth rates of 15%, 761%, 47% and 471% respectively.' Huang Xiaoyue, co-managing partner of KPMG China's private equity industry, said that the development of high-end manufacturing industry and the realization of dual-carbon target are the inherent requirements to promote high-quality development. The central government supports relevant enterprises in terms of capital, tax incentives, financing services, industrial chain docking, etc., and guides the flow of funds to these fields.

In addition, according to Zero2IPO statistics, in the first half of this year, over 70% of IPO enterprises were concentrated in five major industries: machinery manufacturing, semiconductor and electronic equipment, biotechnology/medical health, chemical raw materials and processing, and IT. 'At present, high-end manufacturing and hard technology enterprises have become the main body of IPO of domestic enterprises, promoting the smooth exit of PE/VC investment. The smooth exit channel further attracts more investment, and it is expected that the above-mentioned track investment will remain hot in the second half of the year. ' Huang Xiaoyue further said.

The service level has steadily improved.

As one of the important links in the investment of start-ups, in recent years, the scale of private equity fund industry has steadily increased, the level of service entity economy has been continuously improved, and it has played an important role in promoting the formation of innovative capital, increasing the proportion of direct financing, supporting technological innovation and industrial transformation and upgrading.

According to the data of the CSRC, as of the end of last year, equity venture capital funds have invested more than 160,000 times in the equity of unlisted enterprises in China and the equity of listed companies in the New Third Board, forming an equity capital of 10 trillion yuan. In 2021, the capital invested in unlisted and unlisted enterprises in China increased by more than 800 billion yuan, equivalent to 2.7% of the newly-increased social financing scale in the same period, and became an important carrier of long-term capital formation. According to the latest data of China Foundation, as of July 2022, there were 14,781 managers of private equity and venture capital funds, and the scale of existing private equity and venture capital funds reached 10.97 trillion yuan and 2.70 trillion yuan respectively.

In Liu Xingguo's view, private equity investment fund is undoubtedly an important choice for direct financing of enterprises. Especially in the aspect of scientific and technological innovation, due to the high growth of scientific and technological enterprises, there are also some problems such as long investment cycle and high investment risk. Based on their relatively high investment risk preference, private equity funds can play a greater role.

In recent years, with the reform of the registration system, the establishment of a 'reverse linkage' mechanism for shareholders of venture capital funds of listed companies to reduce their shares, and the share transfer of equity venture capital funds, etc., the private equity market environment continues to improve. In order to alleviate the problem of 'difficult exit' of private equity institutions, on July 8 this year, China Securities Regulatory Commission (CSRC) said that it has recently started the pilot work of private equity venture capital fund to distribute stocks to investors in kind.

According to industry insiders, the private equity industry is facing good opportunities for development. In the future, we should start with fundraising, investment and post-investment management to continuously improve our ability to serve the real economy.

'In the fundraising process, how to attract more high-quality and long-term funds has always been the focus of Chinese private equity investment institutions.' Wu Fuchang said, on the one hand, private equity institutions should take into account both income and risk, optimize LP structure, and actively attract long-term funds such as insurance and trust; On the other hand, private equity institutions can actively participate in government-guided fund projects, help market-oriented operation of state-owned capital, and jointly serve regional economic development. '

Huang Xiaoyue suggested that at present, the investment of private equity investment institutions gradually extends from the middle and late stage and mature stage to the early and medium-term growth enterprises, and post-investment management gradually becomes the core competitiveness. It is suggested that private equity investment institutions change the extensive mode of 'rapid investment+arbitrage in capital market' and continuously improve their post-investment management ability.