Investors Eye Asian Energy Sector
During the past quarter, private equity and hedge fund investors have been looking to gain more exposure to the energy sector in Asia. During the fourth quarter of 2009, there was very little interest in the energy sector, with only two mandates from private equity investors and seven from hedge fund investors. That changed dramatically in the first quarter, with the number of private equity leads increasing to 24 and the number of hedge fund mandates reaching 39.
The main reason for investors’ interest stems from the recent demand for energy by Asian countries. For example, the French industrial gas firm Air Liquide posted a 5.2 percent increase in sales at the end of the first quarter, which they attributed primarily to a 25 percent revenue increase in Asia-Pacific regions.1
In addition to seeing Asia as an area of high demand, investors are also realizing that the region is a source of supply. PTTAR, Thailand’s largest integrated aromatics refinery, posted a 35 percent earnings increase in the first quarter.2 More and more, Asian countries have the infrastructure to produce energy, including the refineries, expertise, and labor.
Exposure to the Asian energy sector provides investors with a relatively unique investment opportunity for the location, a chance to rebalance portfolios that maybe overweight in declining markets, and the ability to appease board members at endowments and pensions funds who want to increase exposure to the energy sector and Asian markets.
As demand for—and the supply of— energy increases in this region, investors can expect investment opportunities to do so as well.
1 Reuters, “UPDATE 2-Emerging markets boost Air Liquide Q1 sales,” April 26, 2010.
2 Reuters, “Thai PTT Aromatics Q1 net profit up 35 pct, meet forecasts,” April 26, 2010.