"We've noticed that trading volume has surged to the highest level for at least the past six years," said Gil Forer, Global Director of Ernst & Young's Venture Capital Advisory Group. "This shows investors' discretion in choosing investments. Capital is aggregated and placed into a small fraction of short-listed companies, so that those most prospective emerging market leaders are backed up to enter into global competition, and are thus well placed to emerge as new global market leaders."

'Green technology' drawing attention

Investors alerted to the enormous potential of "green technology" companies lined up to provide backup to them.

In 2006, capital amounting to $761 million worldwide was invested into the area of "green technology," up 50 percent over combined figures of the three quarters of 2005.

In the United States, a total of $586 million was distributed to 60 companies specialized in "green technology" applications, a level 30 percent higher than the aggregate of 2005; Europe experienced a 26 percent increase compared with 2005, to reach $102.4 million in "green technology" investments. China's venture capital for green technology, meanwhile, was sizzling, with 2006 seeing nine deals for a total of $74 million from venture capital investment.

Forer added, "Whether it is a mature or emerging market, the need for innovation in areas such as Web 2.0, green technology and bio-sciences is mounting."

"The fact that consumers worldwide are rapidly benefiting from the burgeoning consumer technology market along with technological advancement plays a significant role in driving robust growth of global venture capital," said Harmston.

Web 2.0 most favored

In 2006, consumer technology related projects expanded fast, with investment in Web 2.0 surpassing the total of 2005. According to a report issued by Dow Jones Consumer Technology Ventures, a total of $456 million was invested in 79 Web 2.0 deals up to the third quarter of 2006, more than double the same period in 2005.

By the third quarter in 2006, a flow of $1.63 billion had been invested in consumer technology companies, almost equalling the total for 2005.

"Investment in consumer technology projects has witnessed growth since 2000, with extra momentum in 2006, a result partly driven by the massive interest in Web 2.0 operators," said Jessica Canning, Senior Research Manager at Dow Jones VentureOne. "Interestingly enough, the public has maintained good evaluation on both the consumer technology industry as a whole and on various Web 2.0 companies, which means that while investments are greatly increased, company valuations are reasonably evaluated."

Private equity funds breaking records

According to statistics from global market surveyor Dealogic, global private equity fund purchases registered a record annual amount of $628 billion from M&As in 2006. It was found that 939 American companies were acquired by international private equity funds for $360 billion, more than the total of the past three years. Investment flooded fields including those of semi-conductors, hospitals and hotels. Statistics also showed that in 2006, acquisition valuations in Asia (excluding Japan) only amounted to $11.1 billion, while the figure for New Zealand and Australia stood at $11.3 billion.

In its analysis, The Wall Street Journal ascribes the surging investment tide worldwide triggered by international private equity funds to an overall environment featuring low interest rates. The upward trend in stock markets around the world has accelerated fundraising of private equity funds.

While hot money is currently being actively pursued, we need to note that despite the fact that international private equity funds offer a rate of return in excess of 20 percent and have attracted large amounts of capital, there is still a considerable proportion that fails to provide satisfactory returns.

After taking ownership of the company, some private equity funds care only about the financial status, and are less concerned about the details of corporate governance.

(Xinhua Finance)

DISCLAIMER: The information contained herein is based on sources we believe to be reliable, but is provided for informational purposes only, and no representation is made that it is accurate or complete. This briefing should not be construed as legal, tax, investment, financial or other advice, and is not a recommendation, offer or solicitation to buy or sell any securities whatsoever.