Lukewarm dealmaking in Greater China in January and February this year — mostly attributable to the week-long New Year holiday — was more than offset by a sharp rebound in March.

Private Equity (PE) and Venture Capital (VC) investors poured a record $11.4 billion into 199 startups in the last month of the quarter, after two months of relative lull, according to DealStreetAsia’s Greater China Deal Review: Q1 2021 report.

This shored up PE-VC funding activity in Q1 2021 to at least $24.1 billion across 464 deals — the best performance in the past six quarters, and an uptick of 1.2% in terms of deal value and 5.9% in terms of deal count, compared with the previous quarter (Q4 2020).

March’s dealmaking pick-up indicates that risk capital is more comfortable parking money in startups, as the rollout of COVID-19 vaccinations boosted investor sentiment across the region. Moreover, China’s GDP in Q1 this year booked a record growth of 18.3%, adding to the optimism.

Average deal size dropped slightly to $57.2 million versus $59.6 million in Q4 2020, but this is still higher than in the two quarters prior to Q4 2020.

Fangchebao (FCB Group), China Evergrande Group’s online real estate and automobile marketplace, was the biggest fundraiser in the three-month period after it agreed to sell a 10% stake to 17 investors for HK$16.4 billion ($2.1 billion) ahead of a planned IPO.

As investors capitalised on the tech adoption accelerated by the pandemic, China’s software industry became the most favoured sector in Q1 in terms of deal count. A total of 49 software developers garnered more than $1.4 billion in the quarter, retaining the sector’s popularity from 2020 when over $4.1 billion was raised from 183 deals.

The biggest fundraiser in the software industry 4Paradigm, which offers AI-enabled, easy-to-use software to help clients develop smart applications, raked in $700 million, or 48.3% of the total financing in the field.

IPOs soar

Public market fundraising, too, soared in Q1 2021.

Companies raised a total of $32.6 billion from 151 IPOs across the eight exchanges we tracked in January-March. This is 143% more than the $13.4 billion raised in the year-ago period.

Hopes of a strong global economic recovery, coupled with huge liquidity boosts by governments last year helped push the MSCI World Index to an all-time high this March. The MSCI World Index, which captures mid- and large-cap companies across 23 developed markets, showed one-year net returns of 54% as on end-March 2021, the highest since the index was launched in March 2006.

Information technology companies raised $17.5 billion from IPOs — the highest for any sector. The IT industry also contributed three of the four billion-dollar-plus IPOs in Q1 2021: Kuaishou Technology, Baidu, and BiliBili.

This year, we expect China’s public markets to enjoy the benefits of the recent expansion of the Stock Connect agreement between Hong Kong Exchanges and Clearing Limited (HKEX) and the Shanghai Stock Exchange (SSE) and Shenzhen Stock Exchange.

“We foresee positive changes in the Hong Kong stock market landscape, as more Chinese tech companies come for a listing in the city,” said senior director of Indosuez Wealth Management Winnie Chiu, whose insights feature in the report.

The Greater China Deal Review: Q1 2021 report covers fundraising by startups in the region with extensive data on:

• Top deals in the quarter
• Top sectors for investments
• Top IPOs of mainland companies in various markets
• Outlook for IPOs and fundraising in 2021
• Insights from some prominent investors

The report is available exclusively to DealStreetAsia – Research & Analytics subscribers. Subscribe/upgrade your subscription now to access our entire set of reports. Still not sure? Opt for a one-month trial for only $299.