In this final post, I will discuss why I said “invest with caution”.
I assume most of my blog readers are located in the states. If you are considering investing in Asia, I would strongly suggest either moving there yourself or establishing a close trusting relationship with someone who lives in Asia, speaks the language, knows the right people (especially government officers in the sectors that you are interested in investing) and has a good financial sense. Asian market is not as well-regulated as in the states, which presents opportunities along with the risks.
Lots of private equity firms do better than hedge funds in Asia because they know the underlying companies, by not just reading the financials but also discussing with key management group and staff on-site, and becoming friends with government officials. As an ex-auditor in PwC China, I had quite a few interesting chats with the warehouse guys and the IT folks, people who do not understand the financial implications of the conversation. Yes, when there’s less transparency, you have more work to do.
