South Korea and India are emerging as attractive destinations for private debt investors, according to SC Lowy CEO Michel Lowy. With China's economic growth slowing and geopolitical risks rising, Lowy's investment firm is shifting its focus to these two Asian economies. South Korea, with a projected GDP growth of 2.3% this year, and India, expected to expand by 6.5%, offer promising opportunities for private debt investments.
SC Lowy, managing $1.5 billion in funds, sees potential in real estate and manufacturing sectors in both countries. Lowy highlighted South Korea's strong legal system, creditor rights protection, and efficient processes, making it an attractive market for investors. However, barriers to entry, such as language and regulatory complexities, pose challenges for foreign investors.
In South Korea, the demand for private credit is driven by restrictions on real estate debt imposed by the central bank. SC Lowy focuses on refinancing construction loans for assets that have not been sold as quickly as planned. Industrial businesses, particularly mid-sized companies, also present borrowing opportunities.
Regarding India, Lowy has been investing in the country for about 20 years, noting improvements in the insolvency regime and creditors' rights. The Indian economy's growth trajectory, coupled with a regulated banking system, creates a conducive environment for private debt investments. SC Lowy's recent transaction in India involved a manufacturer of credit cards.
Lowy believes that India's manufacturing sector could benefit from geopolitical factors, local demand, and export growth. As manufacturing shifts from China to India, driven by global preferences and India's economic growth potential, opportunities for private debt investments are expected to increase.
While SC Lowy was previously eyeing Chinese debt selectively, the firm has ceased investments in China due to concerns over downside protection and visibility. Lowy emphasized the importance of strong local knowledge and presence in the Asia-Pacific region to navigate the funding gap and regulatory challenges.
Despite the geopolitical uncertainties in the region, South Korea's alignment with the U.S. and Japan has reduced its reliance on China. Lowy remains optimistic about the investment prospects in South Korea and India, citing their growth potential and regulatory frameworks as key drivers for private debt investments.
As SC Lowy continues to raise new private debt funds to expand its capital deployment in the Asia-Pacific region, the firm's strategic focus on South Korea and India reflects its confidence in the opportunities presented by these dynamic economies.
