Korea suffers from nutcracker effects in between Japan and China In ASEAN M&A market

Many are concerned that Korea may lose its initiative in ASEAN cross-border M&A market as the country is significantly falling behind its competitors such as Japan and China. Between January 2010 and May 2015, the shares of ASEAN M&A of Japan and China were 13.0 percent (ranked No.1) and 8.1 percent (ranked 5th), respectively, based on acquisition price, while that of Korea was only 2.4 percent (ranked 12th).

The Institute for International Trade of the Korea International Trade Association released a report titled “Competition Between Japan and China in ASEAN cross-border M&A, What Is Korea’s Strategy?” According to the report, while the M&A market in ASEAN has been expanding, Japan and China have led ASEAN M&A cross-border market with the two countries’ combined shares of 33.2 percent (Japan 28.5%, China 4.7%) in 2013 and 34.5 percent (Japan 9.9%, China 24.6%) in 2014.

During the same period, Japan executed more than 50 percent of its M&As in finance sector and many analyzed that it was the solution for its finance institutions’ worsening profitabilities due to matured domestic market as well as low interest rate. In contrast, China has carried out M&As focusing on investment in infrastructure and the share expansion of manufacturing industry as the country has enough growth potential in its domestic markets.

Japanese companies’ good performance due to low yen and the Chinese government’s ‘one belt one road’ policy as well as its relaxation of foreign investment review process will help Japan and China to accelerate their expansions in ASEAN M&A market. Kim Jungkyun, a researcher at KITA said “Korea is suffering from nutcracker effects in between Japan and China in ASEAN M&A market. Thus, Korea is required to expand its M&A targeting retail and finance sectors as well as IT industries in which Korea has global
competitiveness.”

<Source: KITA>

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