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Kohlberg Kravis Roberts (KKR-N) is placing an early bet on a slowdown in the Chinese economy, and plans to expand into Hong Kong in the next six to nine months with its $2 billion US special situations unit, the Financial Times reported on Friday.
The buyout group's plans follow news that top TPG Capital LP dealmaker Weijian Shan has raised $875 million for a distressed asset fund to invest in Asia under his PAG group.
PAG's fundraising and KKR's expansion come as some analysts predict that distressed and "special situations" opportunities will rise across Asia when banks and corporations seek to dispose of assets or look for capital for operations.
European banks including BNP Paribas SA, Credit Agricole SA and Societe Generale are selling portfolio assets in the region as they shore up their capital bases.
Small and mid-sized enterprises (SME) in particular face increasing difficulties to raise capital. SMEs account for 60 percent of China's industrial output and employ 80 percent of its workforce, but are struggling to raise funds as they cope with surging costs and dwindling profits.
"There will be opportunities in China, especially in the property company sector. There's a huge amount of property company bonds already trading at 20-30 percent yields. I don't think China will blow up, but some of the companies there will," Wilbur Ross, chairman and chief executive of U.S. turnaround investor W.L. Ross told the FT.
KKR recently established a $140 million real-estate fund with Sino-Ocean Land, to invest in Chinese real estate.
Asia-focused distressed debt funds have raised only 6 percent of the $197.3 billion in global capital that went into the asset class in the past seven and a half years, the FT reported, citing data from research firm Preqin.