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SoftBank Puts Brake On Chinese Investments Amid Govt Crackdowns

Multinational conglomerate company SoftBank Group Corp (SFTBY) said on Tuesday that it would be stopping all its investment activities in China as the company waits for the government action against the country's tech firms to get over.

Chief Executive Masayoshi Son said, ""Until the situation is clearer, we want to wait and see. In a year or two, I believe new rules will create a new situation."

SoftBank's Vision Fund has made investments in Chinese ride-hailing firm Didi Global Inc. and "Uber for trucks" startup Full Truck Alliance Co Ltd and these companies have been listed on the New York Stock Exchange.

The Chinese government's regulatory crackdown on technology firms has affected company valuations badly, thus highlighting SoftBank's China risk. All these developments are happening in China even as the company plans to reduce its dependency on its largest asset, a stake in Chinese e-commerce giant Alibaba Group Holding Ltd.

The government actions have forced the company to put off its investments in the country, which constitutes a quarter of its funds' portfolio.
Commenting on the developments, Navneet Govil, Chief Financial Officer, Vision Fund, said, "While the crackdown has affected returns expectations, "our broader thesis in China is unchanged. It's still a large, growing and compelling economic opportunity."
The events in China have had an impact on Vision Fund's outlook even as the company posted profit of 236 billion yen or $2.14 billion in the first quarter. The company said that gains from listings were offset by falling shares of firms like South Korean e-retailer Coupang Inc .

Govil said, "Having a large public portfolio introduces volatility but at the same time it allows us to continue to monetise in a very disciplined manner."

Looking ahead, SoftBank said that it is increasing investments through 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.

SoftBank's head, Son, said that he would invest in the second fund through a scheme using his company shares as collateral.

The company is also looking forward to benefits from listings by Indian payments firm Paytm and insurance aggregator Policybazaar and Southeast Asian ridehailer Grab, which will soon become public through a blank-cheque company merger.

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