China hogs APAC fintech funds in first half amid global decline, investor caution: KPMG

China was one of the top destinations for fintech investments in Asia-Pacific (APAC) in the first half of the year, but it mirrored a global decline, as investors tread with caution amid high interest rates and geopolitical uncertainty, according to KPMG.

Fintech investment worldwide fell nearly 17 per cent to US$51.9 billion in the six months to June, compared with US$62.3 billion in the second half of 2023, according to the consultancy’s Pulse fintech report on Thursday. The number of deals fell 1.4 per cent to 2,255 from the previous six-month period.

The value of investments in China dropped by a similar 17 per cent to US$624 million from January to June, compared with US$754.6 million in the second half of 2023.

APAC, meanwhile, experienced its slowest half-year inflow in seven year, with fintech investment dropping nearly 20 per cent to US$3.7 billion in the first half of the year, from the previous six-month period. Fintech investments in the Asia-Pacific region in the second-half of 2017 reached US$1.96 billion.

“Investors are acting cautiously, particularly on the mergers and acquisitions front, given concerns about valuations and the profitability of potential targets,” said Karim Haji, global head of financial services at KPMG International. Investors are focused on improving the prospects of the companies they already own rather than buying anew, he added.

The cost of capital has remained elevated for at least the past couple of years as central banks use high interest rates to get a grip on runaway inflation. Investors are also treading carefully on tech investments in China, as the US weighs more restrictions and the US presidential election approaches in November.

Mainland China and Hong Kong accounted for five of the top 10 fintech deals in APAC in the first half.