China's big tech money seen in US$2b worth of South-east Asian deals

Singapore

ANOTHER year, another wave of Chinese money flowing into South-east Asia. Tech giants Alibaba, Ant Group and Tencent participated in over 10 regional fundraises worth US$2 billion this year, even as they faced unprecedented pressure at home.

Tencent struck the most deals, investing in at least six South-east Asian startups, ranging from fintech and e-commerce plays to analytics companies (see table).

This is in line with Tencent's well-known strategy of taking minority stakes across a range of new-economy sectors. Its past South-east Asian investments include Internet giant Sea, ride-hailing player Gojek and distressed streaming service iflix.

The company broadened its regional portfolio this year. In March, it joined SoftBank Vision Fund 2 in pouring US$300 million into Singapore's PatSnap, taking the patent analytics startup to unicorn status. Tencent also made smaller bets on Mighty Jaxx, a rising star in designer toys, Thai insurtech Sunday and Indonesian B2B e-commerce startup Ula.

More notably, the Internet giant has doubled down on digibanking. In June, Tencent and private equity giant KKR contributed to the US$167 million fundraise of Voyager Innovations, a Philippine e-wallet operator which both had earlier backed in 2018.

The fresh funding will power Voyager's planned digibank, which aims to provide low-cost banking services on the back of the company's e-wallet, PayMaya.

Tencent has also thrown its weight behind another digibank player, Tyme, which operates in South Africa and moved to Singapore this year. Tyme also recently clinched a digibank licence in the Philippines.

All of Tencent's activity around digibanking comes as Alibaba-linked Ant is set to launch its digital wholesale bank in Singapore. This further intensifies the battle to capture the underbanked market in South-east Asia, as both rivals face a saturated market and regulatory scrutiny in China.

"Tencent and Alibaba are looking for opportunities outside of China, given what's happening with the government, and digibanking is absolutely key to any of these companies," said Angus Mackintosh of CrossASEAN Research. READ MORE:

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Su Lian Jye, principal analyst at ABI Research, noted Tencent has also been expanding its WeChat Pay ecosystem in South-east Asia, although the international growth may have been slowed down by the pandemic and China's tech crackdown. "But the development should resume once the borders reopen and travel restrictions ease up," he said.

On the payments front, Ant has likewise stepped up its game with its cross-border payments solution Alipay+ (not to be confused with the e-wallet Alipay), which works with several regional e-wallets, including Singapore's EZ-Link Wallet and Malaysia's Touch 'n Go.

Ant has also put more money into two existing portfolio companies this year: Mynt in the Philippines and Ascend Money, which this year became Thailand's first fintech unicorn.

On a smaller scale, Ant pumped US$15 million into Singapore-based restaurant booking app Chope, as part of a wider strategic partnership targeting the SME market. As Ant previously told BT, its ambition in this region is to be the go-to fintech partner for SMEs.

Concentrated bets

While Ant has made big moves on the fintech front, Alibaba has focused on two other strategic sectors: retail and logistics.

Alibaba made its first investment in Vietnam this year, leading a US$400 million round in The CrownX, the retail arm of Masan which operates the WinMart chain. The deal could potentially give Alibaba exposure to the fast-growing online grocery market in Vietnam.

"The combination of Alibaba's online retail expertise, Lazada's e-commerce platform in Vietnam and Masan's leading offline network will be a strong catalyst to modernise Vietnam's retail landscape. We look forward to building a champion offline-to-online platform alongside Masan," an Alibaba spokesperson told BT.

Separately, in September, the e-commerce giant poured US$200 million into last-mile logistics player Ninja Van, according to regulatory filings. This was part of Ninja Van's US$578 million Series E round, which took it past unicorn status.

This is a boost to Alibaba's logistics portfolio in the region. The company has long been a shareholder of postal service SingPost, with a 14.6 per cent stake as of end-March.

Could this signal collaboration between SingPost and Ninja Van? Mackintosh of CrossASEAN reckons that Alibaba may simply be spreading its bets, choosing to "back more than one horse".

Besides investing into local players, Alibaba is also growing the South-east Asian footprint of its own logistics unit, Cainiao.

This year, Cainiao launched direct air freight from China to East Malaysia to boost Lazada's cross-border logistics. It also entered a cross-border logistics partnership with the supply chain unit of supermarket operator FairPrice Group, to facilitate customs clearance and last-mile delivery for Taobao and Tmall orders.

Moving into 2022, all three tech giants - Alibaba, Ant and Tencent - are expected to continue their proxy war via South-east Asian startups, especially those in up-and-coming sectors. "They're almost a bit of a barometer for the areas in which growth is really carrying," said Mackintosh.

At the same time, they could bring more of their business units to the region. For instance, Tencent's TiMi Studio Group is reportedly setting up a new game development studio in Singapore, according to the South China Morning Post. Tencent subsidiary Riot Games has also shifted many in its Hong Kong team to Singapore, the report added.

An industry player told BT that despite the uncertain regulatory environment in China, its tech players are still buzzing.

He said: "The new economy in China is real and there are so many opportunities in an ecosystem that has tech, talent, appetite and desire... New regulations also mean new opportunities."

Watch this space

While other Chinese tech giants are not as active on the deal-making front, they are aggressively stepping up their presence in South-east Asia.

China's largest exchange Huobi has picked Singapore as its Asia base, after China banned crypto transactions in September.

Another Chinese tech name to arrive in Singapore this year is Shanghai-based Keenon Robotics. Backed by the Vision Fund 2, the company has entered a partnership with SoftBank Robotics to launch its delivery robot in Singapore and Japan.

Those with an existing presence in Singapore, such as ByteDance, Huawei and OneConnect Financial Technology continue to hire actively in SIngapore, while rolling out numerous sweeteners to attract and retain employees.

Some could be facing more challenging times, like Baidu-backed iQiyi. The company previously expressed growth ambitions in Singapore - with plans to hire over 200 here. But recent reports indicate hundreds are being laid off by the company, amid losses.

Another name to watch is Temasek-backed SenseTime, which specialises in AI for smart city and business applications. The company's planned Hong Kong listing had been postponed, after the US placed it on a blacklist over alleged involvement in Xinjiang, but has since been reopened on Monday (Dec 20). In July, it set up an innovation hub in Singapore and expressed plans to broaden its presence here.

In any case, the talent wars are undoubtedly heating up. The concentration of international businesses in Singapore "is a double-edged sword because everyone is drawing from the same talent pool", an Alibaba spokesperson previously told BT.