Emerging Asia has been repeatedly proving itself to be the world’s best investment destination, not only with its rapid economic growth and massive market potential, but also with its attraction of a huge fund inflows every year. Recent statistics released by the Emerging Market Private Equity Association show that over 90 percent of emerging market private equity (EMPE) fund inflows over the first quarter have settled in emerging Asia.

Among the roughly US$10.4 billion worth of PE funds attracted to emerging markets all over the world, around US$9.3 billion made its way to emerging Asia as its final destination, accounting for 93.3 percent to the total EMPE funds flow over the past three months.

Beating all its emerging Asian neighbors, China has become the largest EMPE fund raiser. It received funds amounting to US$5.7 billion, 6.7 times more than the US$858 million attracted by its neighbor India.

Other emerging countries in Central and Eastern Europe, Commonwealth of Independent States, Latin America, Middle East, North Africa and Sub-Saharan Africa shared the rest of the EMPE funds with a value of US$1.1 billion. The Latin America and Caribbean region, together with Sub-Saharan Africa, raised 83.9 percent of those funds, showing their development potential following emerging Asia.

The volume of total EMPE funds raised so far sends the market a positive signal that this year’s fund raising may be able to exceed last year’s, since the first quarter’s amount has already approached half of last year’s annual volume.

While the amount of fundraising increased, the scale of EMPE deals has also improved. Over the past three months, although there was only 199 deals closed, slightly declining from the 210 closed deals record set a year earlier, the total deal value has increased considerably by US$2 billion, to US$5.9 billion from 2010 Q1’s US$3.9 billion.

It is not hard to imagine that most EMPE investment will follow the fund flow and take place in emerging Asia as well. Investments of approximately US$4 billion were in emerging Asia during the first quarter, accounting for 66.7 percent of the total EMPE investment across different regions.

Interestingly, although having raised most of the funds, China was not the champion of EMPE investment attraction. Instead, investments in India doubled the investment volume in China, amounting to US$2.4 billion.

The lack of investment, in contrast with affluent fund storage, may indicate the immaturity of the Chinese PE market. The market, which saw its PE fundraising start to soar in 2005 and surpassed India as emerging Asia’s largest PE fund raiser in 2006, may want to note that despite its abundant cash flow, it needs to exploit more projects worth investing on.

PE investment, as a relatively new investment form to the Chinese, contributed 0.16 percent to the country’s GDP in 2010, much smaller than its contribution to developed markets, such as in the United Kingdom (1.13 percent) and the United States (0.9 percent).