Undeterred by ongoing political and economic turmoil in Asia, Chase Manhattan Corp. is planning to step up equity investments in the region, and so reportedly is Bankers Trust Corp.
Chase's plans come as U.S. banks and other large investors hope to take advantage of low prices in Asia to make outright purchases of local financial institutions, buy smaller equity stakes in such companies, or boost asset management.
Chase has so far directed many of its overseas equity investments to Latin America rather than Asia. However, a Chase spokesman confirmed that his bank's institutional equity investment unit, Chase Capital Partners, plans to increase investments in Asia to about $1 billion over the next five years, from around $150 million today.
In a similar move, Bankers Trust is setting up an Asian fund for investors, according to news reports. A spokesman for the banking company confirmed that it is considering investments in Asia but declined to give details.
Officials at Bankers Trust were unavailable for comment on a report by Bloomberg News, which said the fund could eventually invest $1 billion.
Corporate asset prices as well as real estate prices have plummeted across Asia in the wake of a spreading crisis in Indonesia, Thailand, South Korea, and Japan. The crisis has prompted foreign and domestic banks to sharply curtail lending in the region, forcing local companies to raise funds by selling equity.
At the same time, the decline in prices has attracted rising interest from foreign banks and institutional investors chasing bargains.
In related moves, Citicorp this year tried to buy a bank in Thailand and Mellon Bank Corp. struck an alliance with Hong Kong-based Hamon Investment Group to develop a China investment fund.
South Korea has also offered to sell stakes in its banks to foreign banks as part of an effort to help cover billions of dollars in losses on nonperforming loans.
"Continuing monetary and equity devaluations, which have weakened many of Asia's financial institutions, have also made local companies more attractive to a broad range of western purchasers," said Larry Alberts, vice president in Hong Kong for Mercer Management Consulting. "The result is that bank takeovers in several markets in Asia, which were unthinkable only months ago, now seem inevitable."
Mercer however cautioned potential investors that considerable risks still exist in Asia, especially with regard to acquiring local financial institutions.
"There are the obvious financial risks that may be expected as a result of the weak banking system, opaque lending practices, and poor prudential standards that have prevailed in these markets up till recently," Mercer noted.
Investors considering Asia need to "undertake exhaustive due diligence," the New York-based consulting firm added.