TOKYO (Reuters) -SoftBank Group Corp will pause its investing in China as it waits for regulatory action against the country\u2019s tech firms to play out, Chief Executive Masayoshi Son said on Tuesday.<\/p>\n
\u201cUntil the situation is clearer we want to wait and see,\u201d Son told a news conference. \u201cIn a year or two I believe new rules will create a new situation.\u201d<\/p>\n
When the Japanese conglomerate posted record annual profit in May executives pointed to further upside from Vision Fund investments such as Chinese ride-hailing firm Didi Global Inc and \u201cUber for trucks\u201d startup Full Truck Alliance Co Ltd.<\/p>\n
Those companies listed in New York but Chinese regulatory action has subsequently hammered valuations, underscoring SoftBank\u2019s China risk even as the group seeks to reduce dependence on its largest asset, a stake in Chinese e-commerce giant Alibaba Group Holding Ltd.<\/p>\n
The shift has cast a chill on SoftBank\u2019s investing in China, which makes up about a quarter of its funds\u2019 portfolio.<\/p>\n
While the crackdown has affected returns expectations, \u201cour broader thesis in China is unchanged: It\u2019s still a large, growing and compelling economic opportunity,\u201d said Navneet Govil, the chief financial officer of Vision Fund.<\/p>\n
The Vision Fund unit on Tuesday posted a first quarter profit of 236 billion yen ($2.14 billion) as gains from listings were offset by falling shares in firms like South Korean e-retailer Coupang Inc.<\/p>\n
The China turmoil is clouding the outlook for the group, shares of which have slipped a third from two-decade highs in March amid the completion of a record 2.5 trillion yen buyback. Shares closed up 0.9% ahead of earnings.<\/p>\n
\u201cHaving a large public portfolio introduces volatility but at the same time it allows us to continue to monetise in a very disciplined manner,\u201d said Govil.<\/p> Share price weakness and sell-side analyst speculation have driven expectation that a buyback may be imminent.<\/p>\n \u201cUntil now we have sold assets and announced a buyback. This time there was no event like that,\u201d Son said.<\/p>\n Given the gap between the group\u2019s share price and the value of its assets, he added, \u201cI guess we will do a buyback sometime. The timing and size is something we consider daily.\u201d<\/p>\n More than two-thirds of the portfolio of the first $100 billion Vision Fund is listed or exited. SoftBank has distributed $27 billion to its limited partners since inception.<\/p>\n Further upside will come from listings by Indian payments firm Paytm and insurance aggregator Policybazaar as well as southeast Asian ridehailer Grab, which is due go public via a blank-cheque company merger, Govil said.<\/p>\n SoftBank is also ramping up investing through Vision Fund 2, to which it has committed $40 billion of capital, with the unit making 47 new investments worth $14.2 billion in the April-June quarter alone.<\/p>\n Son said he would invest in the second fund through a scheme using his SoftBank shares as collateral.<\/p>\n In its first quarter, Vision Fund unit gains included 310 billion yen from selling shares in investments such as delivery firm DoorDash Inc and ridehailer Uber Technologies Inc.<\/p>\n However, group net profit fell 39% to 762 billion yen.<\/p>\n SoftBank has also been betting on publicly listed shares through its SB Northstar trading unit.<\/p>\n It held stakes in firms worth $13.6 billion at the end of June with the portfolio no longer including Microsoft Corp or Facebook Inc listed three months earlier.<\/p>\n The unit will shrink as SoftBank prioritises the Vision Fund, Son said.<\/p>\n ($1=110.3900 yen)<\/p>\nVISION FUND UPSIDE<\/h2>\n