Two years ago, SC Lowy’s CEO Michel Lowy was cautiously looking at investing in China, focusing more on Asia, the Middle East, and Europe. However, slow economic growth and rising geopolitical risk have since made China less attractive. Instead, Lowy now sees potential in South Korea and India, where he believes there are better opportunities than ever before. With South Korea’s GDP projected to grow by 2.3% and India’s by 6.5% this year according to the IMF, Lowy sees potential in real estate and manufacturing sectors in both countries.
Having co-founded SC Lowy in Hong Kong in 2009, Lowy explains the shift in focus from China to South Korea and India. He highlights the lack of appropriate criteria in China for private creditors to be comfortable with downside protection and visibility, leading them to stop investing in Chinese debt. On the other hand, South Korea and India offer better prospects for investment, with banks in these markets either retrenching or facing regulatory constraints that create opportunities for private debt investors like SC Lowy.
Lowy explores the boom in private credit in the Asia-Pacific, emphasizing the significant funding gap in the region due to rapid demand growth and inefficiencies in credit supply. With the region expected to account for over half of global GDP in the coming years, there is a high demand for private credit. Lowy sees strong potential in South Korea, with its robust legal system, strong creditor rights protection, and limited foreign capital investment in debt. He also notes the barriers to entry in the market, making it challenging for foreigners to navigate.
In India, Lowy has been investing for around 20 years, initially in portfolios of non-performing loans. He highlights the improved insolvency regime and creditors’ rights in the country, albeit slower than in South Korea. The macroeconomic opportunities in India are promising, with a growing economy and a banking system that is highly regulated. Lowy sees potential in various sectors, including real estate and industrial businesses, with recent investments including a manufacturer of credit cards. He also predicts increased manufacturing growth in India, driven by geopolitical factors, local demand, and export growth.
As for the future of SC Lowy, Lowy reflects on the advantages of having Hong Kong as the firm’s headquarters, citing the ability to recruit talent, good schooling, and efficient operations in English. While Hong Kong remains the largest office for now, Lowy acknowledges that this may change in the future. Despite uncertainties in the global economy and geopolitical landscape, Lowy remains optimistic about the opportunities in South Korea and India, emphasizing the potential for growth and investment in these markets.
