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Early bird Investor catches worm as others go hungry
By Zhou Yan and Ma Zhenhuan (China Daily)
Updated: 2009-12-28 08:06
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In the eyes of Jacob Wallenberg, his family's decision to tap into the Chinese market as early as the late 1970s turned out to be a wise move, especially as most investment firms have now been taken down a peg by the global financial crisis.
"Most companies in which we have big stakes started entering China very quickly after the 'cultural revolution' (1966-76), when they were often among the first in their industries willing to invest in China," said Wallenberg, chairman of Investor AB, a Nordic-based investment company founded almost 100 years ago by the Wallenberg family.
As early as the late 1970s, it was an adventure for companies such as Investor AB to pump capital into a market that was almost unknown by the western world.
"Today, we're extremely happy with our development in the country, but it was very unclear 30 years ago," Wallenberg said.
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For instance, the Scandinavian firm was among the first funds, along with Goldman Sachs and Fidelity Capital, to invest in China's e-commerce company Alibaba in 1999 when the latter was founded. The home-grown high-technology firm has risen to become an Internet business behemoth that saw HK$11.6 billion raised at its initial public offering (IPO) in Hong Kong in November, 2007, making it the second-largest IPO sale after Google in the Internet sector.
"Our ultimate investment objective is not only to make money, but to try to develop a firm from its early stages to its becoming a world-famous one. Our firms always go international very quickly with a very focused business," Wallenberg said.
The company has invested in more than 20 small-sized firms in China now, mainly focusing on enterprises related to technologies in which Investor has very strong expertise.
"Our investment amounts vary from $5 million to $15 million in accordance with the companies' needs. Some firms we've invested in have had a tendency to go public," said Paul J. H. Choo, chief representative at IGC Asia's Beijing representative office.
"We hope our business in China will grow to account for 15 percent of our firm's global business from its current 8 percent in the next three years," Choo said.
The Wallenberg family is among the most influential families in Scandinavia. As early as 1990, the family was estimated to indirectly control one-third of the Gross National Product in Sweden.
It has a stake in some of the best-in-class Scandinavian firms, including one of the world's largest engineering firms, ABB, telecommunication service provider Ericsson, home appliance giant Electrolux, and financial group SEB.
Speaking of the consequences of the current financial downturn, Wallenberg, as a veteran investor, said significant investment opportunities have loomed when a number of cash-strapped companies are for sale.
Thanks to the financial crisis, Investor can acquire firms at a lower premium with more normalized price levels in the future, as fewer financial companies are engaged in trying to outbid us because there is less capital available in the banking system than there was two years ago, Wallenberg said.
"Broadly speaking, I think it's not the end of crisis now, and after the G20 summit we will see higher capital ratios and a more stringent regulatory framework in the banking system, forcing a more conservative investment climate," he said, adding that it was just the beginning of a more developed financial system.
Because there is a foreseeable deleveraging process in the financial system that will result in a less capital available in the market, Wallenberg warned that companies should have cash and good balance sheets to weather the financial winter.
